It was not surprising to see that ETFs enjoyed overall inflows on a global basis over the course of September 2023. Nevertheless, these inflows occurred in an unstable market environment in which some asset classes showed positive results, while others performed negatively. The market sentiment was driven by hopes that central banks—especially the U.S. Federal Reserve—may have reached the last phase of their fight against high inflation rates and may, therefore, start to keep interest rates at least stable quite soon. Some investors already expect that there might be room for decreasing interest rates later this year, but these expectations might be too positive given the hawkish statements from the Fed and other central banks such as the European Central Bank (ECB) and the Bank of England (BoE).
In addition, there are still concerns about the war in Ukraine and other geopolitical tensions. Investors are also concerned about the normalization of the disrupted delivery chains. Even as China seems to be back on track after reopening its economy, there are still some frictions, especially in the real estate sector, in the system.
Additionally, market participants are still concerned about a possible recession in the U.S. and other major economies around the globe. These fears are raised by long-term (12 month+) inverted yield curves which are seen as an early indicator for an upcoming recession.
Within this market environment, the promoters of ETFs enjoyed overall inflows (+$65.0 bn), while the promoters of structured notes faced estimated outflows of $4.0 bn.
Table 1: General Overview on Global Assets Under Management and Estimated Fund Flows by Regions and Major ETF Domiciles (September 30, 2023)
Source: LSEG Lipper
Assets Under Management
Assets under management in the global ETF industry declined from $10,313.5 bn at the end of August 2023 to $9,951.4 bn at the end of September 2023. The majority of these assets ($7,606.2 bn) were held in equity ETFs. This category was followed by bond ETFs ($1,929.6 bn), commodities ETFs ($185.1 bn) alternatives ETFs ($76.5 bn), “other” ETFs ($66.8 bn), money market ETFs (€49.6 bn), mixed-assets ETFs ($37.6 bn), and real estate ETFs (€0.01 bn).
Graph 1: Market Share Assets Under Management in the Global ETF Industry by Asset Type – September 30, 2023
Source: LSEG Lipper
Since this report covers a limited number of ETNs and ETCs, the so-called “structured notes” alongside ETFs, it is important to show the market share of assets under management of these products in comparison to the ETFs, to indicate the relevance and possible impact of these products for this study.
While ETFs held $9,789.3 bn or 98.37% of the overall assets under management, the structured notes covered in this report held $162.1 bn or 1.63% of the overall assets under management at the end of September 2023.
Graph 2: Market Share Assets Under Management in the Global ETF Industry by Product Type – September 30, 2023
Source: LSEG Lipper
Since ETFs are product wrappers which are used for passive index tracking products and active/semi-active strategies, it is important to shed a light on these two different product categories. Market observers expect more growth in the segment of active/semi-active products in the future since an increasing number of active managers start to launch ETFs not linked to an index. It is expected that this trend will continue after the patent on ETF share classes held by Vanguard expired in April 2023.
Nevertheless, it is no surprise that index tracking products held the vast majority of the overall assets under management in the global ETF industry ($9,394.1 bn or 94.40%), while ETFs which are not linked to an index held $557.2 bn or 5.60% of the overall assets under management at the end of September 2023.
Graph 3: Market Share Assets Under Management in the Global ETF Industry by Management Approach – September 30, 2023
Source: LSEG Lipper
Assets Under Management by Region, September 30, 2023
ETFs domiciled in North America ($7,449.0 bn) held the highest assets under management in the global ETF industry at the end of September 2023. They were followed by ETFs domiciled in Europe ($1,581.1 bn), ETFs domiciled in the Asia Pacific region ($897.9 bn), ETFs domiciled in Middle and South America ($16.3 bn), and ETFs domiciled in Africa ($7.1 bn).
Graph 4: Assets Under Management in the Global ETF Industry by Region – September 30, 2023 (in mn USD)
Source: LSEG Lipper
In more detail, the U.S. was the largest single country ETF domicile ($7,173.4 bn) at the end of September 2023, followed by Ireland ($1,081.9 bn), Japan ($491.6 bn), Luxembourg ($313.6 bn), and Canada ($275.6 bn). These five ETF domiciles account for assets under management of $9,336.1 bn, or 93.82%, of the overall assets under management in the global ETF industry.
Assets Under Management by Lipper Global Classification, September 30, 2023
Equity U.S. held by far the highest assets under management ($3,161.8 bn) of the 278 Lipper Global Classifications covered in this report. It was followed by Equity U.S. Small & Mid Cap ($635.2 bn), Equity Global ex-U.S. ($586.6 bn), Equity Japan ($516.8 bn), and Bond USD Medium Term ($349.1 bn).
Graph 5: The 20 Largest Lipper Global Classifications by Assets Under Management– September 30, 2023 (in mn USD)
Source: LSEG Lipper
A closer review of the assets under management by Lipper Global Classification shows that the 10 largest classifications held $6,656.1 bn, or 66.89%, of the overall assets under management of the global ETF industry, while the largest 20 classifications account for $7,876.9 bn, or 79.15%, of the overall assets under management at the end of September 2023.
Assets Under Management by Promoters, September 30, 2023
BlackRock (iShares) is the largest promoter of ETFs globally ($3,159.0 bn). It is followed by Vanguard ($2,267.3 bn), State Street Global Advisors (SPDR) ($1,121.1 bn), Invesco ($472.6 bn), and Charles Schwab Investment Management ($286.2 bn).
Graph 6: Assets Under Management of the 20 Largest ETF Promoters Globally – September 30, 2023 (in mn USD)
Source: LSEG Lipper
As graph 6 shows, the assets under management in the global ETF industry are even more highly concentrated at the promoter level than on the domicile or classification level.
The three top ETF promoter globally account for assets under management of $6,547.8 bn, or 65.79%, of the overall assets under management, while the 10 top promoters account for $8,188.7 bn, or 82.29%, of the overall assets under management and the 20 top promoters account for $8,939.1 bn, or 89.83%, of the assets under management held by ETFs globally.
Global ETF Flows
The global ETF industry enjoyed healthy overall inflows (+$61.0 bn) over the course of September 2023.
As mentioned before, this report covers a limited number of structured notes alongside ETFs. It is important to split the overall estimated fund flows between these two product types to indicate the relevance and possible impact of structured notes for this study.
ETFs enjoyed estimated net inflows of $65.0 bn over the course of September 2023, while structured notes faced estimated net outflows of $4.0 bn for the month.
Graph 7: Estimated Net Sales by Product Type, September 2023 (in mn USD)
Source: LSEG Lipper
The estimated net inflows for the month drove the overall estimated net flows up to $461.3 bn for the first nine months of 2023.
As mentioned before, ETFs can be managed with different approaches. They may use a passive approach (index tracking), where the portfolio of the respective ETF is tied to an index, or an active/semi-active approach where the fund manager has the aim to outperform an index or is not linked to an index at all.
Index tracking products enjoyed the vast majority of the estimated net inflows (+$49.1 bn) over the course of September 2023, while active/semi-active products enjoyed estimated net inflows of $11.9 bn for the month.
Graph 8: Estimated Net Sales by Management Approach, September 2023 (in mn USD)
Source: LSEG Lipper
Global ETF Flows by Region, September 2023
By reviewing the estimated flows in the global ETF industry by fund domicile and the respective regions, one needs to bear in mind that some domiciles have specific advantages or disadvantages when it comes to ETF distribution. The U.S. is, for example, a single market and can take profit from the size of the overall market, while in Europe every market is or at least can be an ETF domicile, which means that the local markets are much smaller. That said, the EU countries have established a fund regulation (Undertakings in Collective Investments and Transferable Securities or UCITS) which enables the fund and ETF industry to cross list all products which are registered for sale in one EU country into another EU country. Since UCITS has become such a well-recognized regulation standard for mutual funds and ETFs, some countries in South and Middle America, as well in Asia, allow UCITS funds to be cross listed and sold to local investors. It is fair to say that there is no other regulatory framework available that allows funds to be distributed in various countries. Other mutual recognition agreements, such as those between Hong Kong and China or Hong Kong and Taiwan, are only bilateral and have no global reach. This means that the estimated flows for European ETFs may also include flows from South and Middle America, as well as from Asia.
As to be expected, ETFs domiciled in North America (+$39.5 bn) enjoyed the highest estimated net inflows for September 2023. They were followed by ETFs domiciled in Asia Pacific (+$14.1 bn) and Europe (+$7.6 bn). On the other side of the table ETFs domiciled in (South) Africa (+$0.03 bn), and South and Middle America (-$0.2 bn), faced estimated net outflows.
Graph 9: Estimated Net Sales by Region, September 2023 (in mn USD)
Source: LSEG Lipper
Global ETF Flows by Asset Type, September 2023
Given the overall market environment, it was not surprising that equity ETFs (+$44.9 bn) were the best-selling asset type for September 2023. They were followed by bond ETFs (+$14.7 bn), money market ETFs (+$1.8 bn), alternatives ETFs (+$1.1 bn), mixed-assets ETFs (+$0.1 bn), “other” ETFs (+$0.01 bn), and real estate ETFs (+$0.0002 bn). On the other side of the table, commodities ETFs (-$1.5 bn) faced estimated net outflows.
Graph 10: Estimated Net Sales by Asset Type, September 2023 (in mn USD)
Source: LSEG Lipper
The fact that investors around the globe bought further into bond ETFs might be seen as a sign that investors may anticipate a possible ending of the interest hiking cycle of central banks around the globe led by the U.S. Federal Reserve. Therefore, this positioning might be seen as a bet against the hawkish statements of the Fed and other central banks, which were indicating that they are willing to hike interest rates further if the inflation rates are not coming down as expected.
Global ETF Flows by Lipper Global Classifications, September 2023
A closer look at the best- and worst-selling Lipper Global Classifications for September 2023 shows that investors are further in a risk-on mode with regard to their risk appetite. This is because the table of the 10 best-selling Lipper Global Classifications is composed of five equity, four bond, and one alternative classification. Despite the dominance of equity classifications on the table of the 10 best-selling classifications—Equity U.S. (+$28.7 bn) was the best-selling classification for the month—one may get the impression that investors wanted to take advantage of the inverted yield curve in the U.S, since Bond U.S. Government Short Term (+$5.9 bn) was the second best-selling classification for September. It was followed Equity Global (+$5.0 bn), Bond USD Government (+$4.1 bn), and Bond USD Medium Term (+$3.3 bn).
Graph 11: Ten Best- and Worst-Selling Lipper Global Classifications by Estimated Net Sales, September 2023 (in mn USD)
Source: LSEG Lipper
On the other side of the table, Equity Europe (-$1.2 bn) faced the highest outflows for September. These outflows might be seen as a sign that investors are concerned about the economic outlook for the region, especially compared to the expectations for the U.S. It was bettered by Bond USD High Yield (-$0.9 bn), Bond USD Inflation Linked (-$0.9 bn), Bond Emerging Markets Global in Local Currencies (-$0.8 bn), and Bond EUR High Yield (-$0.7 bn). More generally, the flow trends for the classifications with the highest estimated outflows may indicate that investors adjusting their portfolios to the current economic environment and reduce market related risks within their portfolios.
An in-depth look at the 10 classifications with the highest in- and outflows indicates that investors around the globe may expect that the central banks, especially the U.S. Fed, will end their tightening cycle sooner rather than later, and the inverted yield curves may normalize as a result. Nevertheless, they seem also to expect some negative impacts from the current interest rate environment.
Global ETF Flows by Promoters, September 2023
Vanguard (+$11.3 bn) was again the best-selling ETF promoter globally, ahead of State Street Global Advisors (+$8.1 bn), Invesco (+$4.2 bn), JPMorgan (+3.3 bn), and iShares (+2.8 bn).
Even as iShares still maintains a comfortable lead over Vanguard with regards to the assets under management, it currently looks like Vanguard is somewhat closing the gap between the two leading ETF promoters globally, since the company is leading the year-to-date sales table (+$110.4 bn) by a wide margin over iShares (+$89.6 bn).
Graph 12: Twenty Best-Selling ETF Promoters Globally, September 2023 (in mn USD)
Source: LSEG Lipper
Overall, the 20 best-selling ETF promoters account for estimated net inflows of $50.6 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.
