Headline figures
Assets Under Management[1]
Chart 1: Assets Under Management of ETFs Listed on the LSE by Asset Type as of October 30, 2023 (£bn)
Source: LSEG Lipper
LSE-listed ETF assets were up 13.6% year on year in October, although marginally down from September. Given the macro and geopolitical uncertainties, that’s arguably not a bad result. Money market funds have increased their share most over the year despite negative monthly flows (up 57.9%), albeit from a low base. However, that’s still worthy of note, as UK investors have been exiting money market mutual funds since last November after the rush to cash following September 2022’s mini budget. On the other hand, alternative ETFs are down to 73.9% of their October 2022 asset value—although, again, this is from a low base, from £2.31bn to £1.71bn.
Equity funds are the largest asset type listed on the LSE (74.9%, slightly down on the month), followed by bonds (22.6%—
see chart 1).
Flows
Chart 2: Estimated Net Flows in ETFs Listed on the LSE by Asset Type, October 2023 (£bn)
Source: LSEG Lipper
Total flows were £8.19bn (£88.86bn for the year): up on September’s £6.7bn but still chasing July’s £12bn.
Bond ETFs reversed their negate flows for September, taking £1.07bn for October. Nevertheless, as has been the case for previous months, equities were out in front. Netting £7.44bn (£53.45bn for the 12 months to October). On the other hand, alternatives saw outflows of £57m and money market funds reversed their positive recent flows, shedding £340m.
Chart 3: Ten Best-Selling Lipper Global Classification, October 2023 (£bn)
Source: LSEG Lipper
For the fourth straight month, October’s top selling sector was Equity US (£4.43bn): as, indeed has been the case once more with ETF flows on a pan-European basis over the month. Why the continuing popularity of US equities, despite the S&P 500 Index being down over both September and October? There’s still very much a bunfight going on between pundits as to what sort of landing the US is heading for, but there is a degree of optimism that it may be of the soft variety of late, and it’s possible that flows are reflective of that. Whatever the reason, of the top-five money takers, three are plain-vanilla S&P 500 vehicles, with the other two of an ESG tilt—with the L&G fund being of the “darker green” Paris-aligned variety.
Source: LSEG Lipper
Second-placed Bond USD Government took £1.81bn over the month. The classification’s popularity is no doubt propelled by Treasury yields being on the rise at the long end, with most money going into 20+ T-Bills, as evidenced by the top three in the table below (whether you want those expanding yields in pounds, euros, or dollars).
Source: LSEG Lipper
Equity Global (£1.4bn) was pushed from second to third place by US govvies, and Equity Europe (£1.09bn) and Japan (£746m) saw significant inflows on the back of decent returns.
Chart 4: Ten Largest Outflows by Lipper Global Classification, October 2023 (£bn)
Source: LSEG Lipper
Significant outflows this month for Bond EUR Corporates (-£1.46bn), well ahead of the second-least popular classification of Equity China, which suffered outflows of £549m. There are fewer negative sector bets in evidence, apart from Consumer Staples, which shed £212m. However, others cluster outside the bottom table, including Industrials (-£122m), Alternative Energy
(-£104m), and Healthcare (-£92m). As I’ve remarked before, it’s interesting that investors are currently expressing negative views through sector ETFs, but few positive ones (the exception being Information Technology in Chart 3), as the strongest inflows go to more broad-based classifications.
Trading Volumes and ETF Flows
Chart 5: ETF Turnover (GBP m) and as a % of Total London Stock Exchange Order Book Turnover
Source: LSEG Lipper
The average traded value for ETFs in October was £13.58bn, which accounts for 13.58% of total London Stock Exchange average daily turnover. That’s a higher absolute number than September’s £8.03bn—the highest since March—and also higher in relative terms (10.03%).
US equities and bonds dominate the table, as do global ETFs, reflecting the flows in Chart 3. What’s interesting is that, despite the strong flows to long-dated Treasury ETFs evident above, that’s not reflected in the funds below, where all the action is at the short end.
Source: LSEG
Chart 6: Active and Passive, Total Net Assets (LHS, %), and Estimated Net Flows (RHS, £bn), October 2023
Source: LSEG Lipper
There are 61 active and 1,681 passive ETFs listed on the LSE, compared to 84 active and 3,024 passive ETFs registered for sale in at least one country in Europe. This means that 55.8% of all active and 55.6% of all passive ETFs are at least cross listed on the LSE.
Active ETF’s total net assets were 1.15% of the total.
However, active ETFs saw outflows of £132m, compared to inflows of £bn for their passive peers.
Table: Ten Best-selling Active ETFs, October 2023 (£m)
Source: LSEG Lipper
New Listings
Chart 7: New listings on the London Stock Exchange since 2004
Source: LSEG Lipper
There have been 145 launches over the first 10 months of the year—15 in October. While it’s not been a bumper year for launches, there’s been something of a pick-up from a slow start. The average since 2010 has been 156, ranging between 99 and 247, so there is a reasonable chance that this will be an above-average year.
Three of the new launches were bond, one mixed-assets and the rest equity, with the three JPM offerings being actively managed.
New Launches, October 2023
Source: LSEG Lipper
Flows by Promoter
Chart 8: 10 Best-Selling ETF Promoter for ETFs Listed on LSE, October 2023 (£bn)
Source: LSEG Lipper
There are 27 promoters with ETFs on the LSE. Four had flows of more than £1bn over October, nine of these accounted for flows of more than £100m, and 19 of the 27 saw inflows.
BlackRock attracted the largest number of assets, at £2.77bn (£43.7bn year on year). Its most successful asset classes were equity (£2.68bn) and bond (£714m). Second-placed Vanguard took £1.54bn (£12.95bn y-o-y), with £1.17bn in equity flows £346m in bonds.
[1] This report covers all assets under management and estimated net flows for ETFs listed on the London Stock Exchange. This means while turnover and trading volume are measures that are taken per exchange, flows and assets under management can only be calculated on a pan-European basis, since most ETFs in this report are cross-listed on various exchanges.
