The European ETF industry enjoyed inflows over the course of February 2023. These inflows occurred in a mixed market environment in which some asset classes showed positive results, while others performed negatively over the course of the month. The market sentiment was still driven by hopes that central banks, especially the U.S. Federal Reserve, may have reached the last phase of its fight against the high and further increasing inflation rates and may, therefore, start to keep interest rates stable quite soon. Some investors already expect that there might be room for decreasing interest rates later this year. Nevertheless, there are still some concerns about geopolitical tensions, and the normalization of the disrupted delivery chains. The performance of the underlying markets led in conjunction with the estimated net inflows to increasing assets under management (from €1,315.0 bn as of January 31, 2023, to €1,317.9 bn at the end of February). At a closer look, the increase in assets under management of €2.1 bn for February was driven by the estimated net inflows (+€8.1 bn), while the performance of the underlying markets (-€6.0 bn), made a negative contribution to the assets under management.
As for the overall structure of the European ETF industry, it was not surprising equity funds (€947.0 bn) held the majority of assets, followed by bond funds (€317.0 bn), commodities products (€32.0 bn), money market products (€11.9 bn), alternative UCITS products (€5.7 bn), mixed-assets funds (€3.3 bn), and “other” funds (€0.1 bn).
Graph 1: Market Share, Assets Under Management in the European ETF Segment by Asset Type, February 28, 2023
Source: Refinitiv Lipper
Fund Flows by Asset Type
The European ETF industry enjoyed estimated net inflows (+€8.1 bn). These flows were way above the rolling 12-month average (€6.0 bn).
The inflows in the European ETF industry for February were driven by equity ETFs (+€6.7bn), followed by bond ETFs (+€1.1 bn), commodities ETFs (+€0.5 bn), mixed-assets ETFs (+€0.2 bn), and “other” ETFs (+€0.002 bn). On the other side of the table, money market ETFs (-€0.4 bn) faced the highest outflows for February 2023, bettered by alternative UCITS ETFs (-€0.003 bn).
Graph 2: Estimated Net Sales by Asset Type, February 2023 (Euro Millions)
Source: Refinitiv Lipper
Assets Under Management by Lipper Global Classifications
In order to examine the European ETF markets in further detail, a review of the Lipper global classifications will help to examine more insights on the structure and the concentration of assets within the European ETF industry. At the end of February 2023, the European ETF market was split into 165 different peer groups. The highest assets under management at the end of February were held by funds classified as Equity U.S. (€272.8 bn), followed by Equity Global (€191.5 bn), Equity Europe (€69.0 bn), Equity Emerging Markets Global (€63.6 bn), and Equity Eurozone (€49.9 bn). These five peer groups accounted for 49.11% of the overall assets under management in the European ETF segment, while the 10-top classifications by assets under management accounted for 60.75%.
Overall, 20 of the 165 peer groups each accounted for more than 1% of assets under management. In total, these 20 peer groups accounted for €952.9 bn, or 72.35%, of the overall assets under management. In addition, it was noteworthy that the rankings of the largest peer groups saw some movement in single positions after the market turmoil caused by the COVID-19 crisis and the following recovery. As the positions of the peer groups had been quite stable in the past, this indicates that European investors use ETFs to trade according to their market views. Even as some of these positions might be core holdings, once investors get into risk-off mode they also reduce their exposure to core asset classes. Nevertheless, these numbers showed assets under management by Lipper global classifications continued to be highly concentrated in the European ETF industry.
Graph 3: Ten-Top Lipper Global Classifications by Assets Under Management, February 28, 2023 (Euro Millions)
Source: Refinitiv Lipper
The peer groups on the other side of the table showed some funds in the European ETF market are quite low in assets and their constituents risk being closed in the near future. They are obviously lacking investor interest and might, therefore, not be profitable for their respective fund promoters (Please read our report: “Is there a consolidation ahead in the European ETF industry?” for more details on this topic).
Graph 4: Ten Smallest Lipper Global Classifications by Assets Under Management, February 28, 2023 (Euro Millions)
Source: Refinitiv Lipper
Fund Flows by Lipper Global Classifications
The net inflows of the 10 best-selling Lipper classifications accounted for €10.5 bn. Opposite to the overall sales trend for February, it was not surprising that equity peer groups (+€8.5 bn) gathered the majority of flows by asset type on the table of the 10 best-selling peer groups by estimated net inflows. Given the overall fund flow trend in the European ETF industry, it was not surprising that Equity Emerging Markets Global (+€3.8 bn) was the best-selling Lipper global classification for February. It was followed by Equity Global (+€1.7 bn) and Equity Europe (+€1.5 bn).
These numbers showed the European ETF segment is also highly concentrated with regard to fund flows by sector. Generally speaking, one would expect the flows into ETFs to be concentrated since investors often use ETFs to implement their market views and short-term asset allocation decisions. These products are made and, therefore, are easy to use for these purposes.
Graph 5: Ten Best- and Worst-Selling Lipper Global Classifications by Estimated Net Sales, February 2023 (Euro Millions)
Source: Refinitiv Lipper
On the other side of the table, the 10 peer groups with the highest estimated net outflows for February accounted for €5.5 bn in outflows.
With regard to the Lipper Global Classifications with the highest estimated outflows for February 2023, it was surprising to see that Equity U.S. (-€2.3 bn) was once again the classification with the highest outflows for the month. The category was bettered by Bond EMU Government (-€0.7 bn) and Equity Sector Healthcare (-€0.6 bn).
Assets Under Management by Promoters
A closer look at assets under management by promoters in the European ETF industry also showed high concentration, with only 24 of the 49 ETF promoters in Europe holding assets at or above €1.0 bn. The largest ETF promoter in Europe—iShares (€605.9 bn)—accounted for 46.00% of the overall assets under management, far ahead of the number-two promoter—Amundi ETF (€174.3 bn)—and the number-three promoter—Xtrackers (€131.0 bn). (To learn more about the concentration of the European ETF market at the promoter level, please read our report: Spotlight on the concentration at the promoter level in the European ETF industry).
Graph 6: Ten-Top ETF Promoters by Assets Under Management, February 28, 2023 (Euro Millions)
Source: Refinitiv Lipper
The 10-top promoters accounted for 93.54% of the overall assets under management in the European ETF industry. This meant, in turn, the other 38 fund promoters registering at least one ETF for sale in Europe accounted for only 6.46% of the overall assets under management.
Fund Flows by Promoters
Since the European ETF market is highly concentrated with regard to the assets under management by promoter, it was not surprising that eight of the 10 largest promoters by assets under management were among the 10-top selling ETF promoters for February. iShares was the best-selling ETF promoter in Europe for February (+€1.5 bn), ahead of Xtrackers (+€1.3 bn) and Vanguard (+€1.3 bn).
Graph 7: Ten Best-Selling ETF Promoters, February 2023 (Euro Millions)
Source: Refinitiv Lipper
The flows of the 10-top promoters accounted for estimated net inflows of €7.9 bn. As for the overall flow trend in February, it was clear that some of the 49 promoters (17) faced net outflows (-€0.6 bn in total) over the course of the month.
Assets Under Management by Funds
There were 3,514 instruments (primary funds and convenience share classes) listed as ETFs in the Lipper database at the end of February. Regarding the overall market pattern, it was not surprising assets under management at the ETF level were also highly concentrated. Only 304 of the 3,514 instruments held assets above €1.0 bn each. These products accounted for €864.2 bn, or 65.62%, of the overall assets in the European ETF industry. The 10 largest ETFs in Europe accounted for €198.7 bn, or 15.09%, of the overall assets under management. (Please read our study: Is the European ETF industry dominated by only a few funds? to learn more about the concentration at the single-fund level in the European ETF industry).
Graph 8: Ten Largest ETFs by Assets Under Management, February 28, 2023 (Euro Millions)
Source: Refinitiv Lipper
ETF Flows by Funds
A total of 1,318 of the 3,514 instruments analyzed in this report showed net inflows of more than €10,000 each for February, accounting for €32.6 bn. This meant the other 2,196 instruments faced no flows or net outflows for the month (When looking at this statistic, one needs to bear in mind that some of these instruments are convenience share classes that do not report assets under management. This means Lipper can’t calculate fund flows for these ETFs). Upon closer inspection, only 80 of the 1,318 ETFs posting net inflows enjoyed inflows of more than €100 m during February—for a total of €17.0 bn. The best-selling ETF for February was iShares Core MSCI Europe UCITS ETF EUR (Acc), which enjoyed estimated net inflows of €0.6 bn. It was followed by iShares Core MSCI EM IMI UCITS ETF USD Acc (+€0.6 bn) and UBS LFS MSCI Emerging Markets UCITS ETF (USD) Aa (+€0.6 bn).
Graph 9: Ten Best-Selling ETFs, February 2023 (Euro Millions)
Source: Refinitiv Lipper
The flow pattern at the fund level indicated there was a lot of turnover and rotation during February, but it also showed the concentration of the European ETF industry even better than the statistics at the promoter or classification levels. Given its size and the overall trend for net sales at the promoter level, it was surprising that only four of the 10 best-selling funds for February were promoted by iShares. These iShares ETFs accounted for total estimated net inflows of €2.0 bn.
This article is for information purposes only and does not constitute any investment advice.
The views expressed are the views of the author, not necessarily those of Refinitiv Lipper or LSEG.
