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March 13, 2024

London Stock Exchange-Listed ETF Report: February 2024

by Dewi John.

Headline figures

Assets Under Management[1]

Chart 1: Assets Under Management of ETFs Listed on the LSE by Asset Type as of February 29, 2024 (£bn)

Source: LSEG Lipper

 

It’s equities all the way, as LSE-listed ETF assets break the £1trn barrier.

LSE-listed ETF assets added £6.43bn to their total over February, breaking through the £1trn barrier in the process.

Total ETF assets grew by £38bn over February through a combination of inflows and market moves: a growth of 4.7% over February and 24.3% on an annual basis. Equity funds saw the greatest growth in percentage terms on a month-on-month basis (6.6%), growing 28.4% year over year. Conversely, mixed-assets ETFs where once more the main negative movers, albeit from a low base.

Equity and bond funds comprise the overwhelming majority of the total, at 77.3% and 20.5%, respectively.

 

Flows

Flows by Asset Type

Chart 2: Estimated Net Flows in ETFs Listed on the LSE by Asset Type, February 2024 (£bn)

Source: LSEG Lipper

 

Total flows were barely half those of January, at £6.43bn compared to £12.6bn (£99.23bn over 12 months). That said, the previous month exceeded the highest monthly inflows for 2023.

Equity funds netted all of this and more, at £8.8bn (£73.36bn over 12 months). Money market funds were the only other asset class in positive territory, taking £81m. Mixed-assets continued their negative run, suffering outflows of £626m—significant, given the low total net assets. The largest outflows, however, were from bond ETFs, which shed £1.73bn, as long-duration bonds and rate-sensitive sectors suffered the impact of rising long yields in the US, UK, and Europe (seeing inflows, however, of £21.73bn over 12 months).

 

Largest Inflows

Chart 3: Ten Best-Selling Lipper Global Classification, February 2024 (£bn)

Source: LSEG Lipper

 

Over the month, Japanese and US equities once again outperformed the FTSE All-World, although this didn’t prevent Equity Global ETFs taking the largest share of the flows, at £4.69bn. Equity US took second place, netting £2.87bn, while Equity Japan took a more modest £356m. A rebound of Chinese equities was supportive of emerging markets, with the respective equity classifications taking £217m and £651m. Equity China saw the largest outflows in January.

Despite the negative fortunes for fixed income in general, Bond Global USD (£513m), Bond Global Corporates EUR (£508m), Bond USD Corporates (£432m), and Bond Global Corporates USD (£201m) were favoured by UK ETF buyers.

As can be seen from the table below, the main beneficiaries of global flows were plain vanilla passives, with the exception being an ESG “enhanced” index product.

 

Source: LSEG Lipper

 

The picture for Equity US is pretty much identical: large cap index trackers, with one “enhanced” ESG product.

 

Source: LSEG Lipper

 

Largest Outflows

Chart 4: Ten Largest Outflows by Lipper Global Classification, February 2024 (£bn)

Source: LSEG Lipper

 

Although Eurozone credit rallied from depressed valuations after energy and Ukraine shocks, UK ETF investors were not convinced, instead withdrawing £2.25bn from Bond EUR Corporates. Elsewhere in fixed income, Bond Emerging Markets Global HC (-£288m), Bond GBP Corporates             (-£157m), Bond EMU Government MT (-£119m), and Bond USD Inflation Linked (-£112m) lost ground—the latter, perhaps, a little surprising given the pessimism regarding the stickiness of US inflation over the month.

Mixed Asset USD Bal – Global suffered the second-largest outflows, at £627m. As we’ve commented elsewhere, mixed-assets funds—conservative and balanced—have been used as bond proxies in a low-rate world, which is now being reversed as rates rise.

Hammered by elevated rates, Equity Theme – Alternative Energy continues to suffer outflows, this month of £127m.

Just outside the scope of the chart, Equity Global Income and Equity US Income ETFs both saw redemptions of £112m.

 

Sustainable ETFs

Chart 5: Sustainable ETF Sales, (LHS, £m), and Estimated Net Flows (RHS, £bn), February 2024

Source: LSEG Lipper

 

Some £163.33bn of ETF assets on the London Stock Exchange are defined by Lipper Research as sustainable (see definition below), up from £156.88bn in January. The bulk (83.26%) are equity, with 16.78% in bond vehicles. That latter figure is slightly down on the previous month’s, despite stronger absolute inflows. However, note that sustainable bond flows are positive, in contrast to the significant negative flows for the asset class overall.

Over February, sustainable equity ETFs attracted £802m (up from £652m in January), while their fixed income peers took £199m—a significant increase on January’s £14m, but still well down on December’s £660m. In aggregate, sustainable flows were £1bn.

As can be seen from the table below, flows mirrored the wider market, with investors favoring Global and US equity ETFs, with the £336m to a Bond Global Corporates EUR being the only divergence from the month’s trend. What’s noteworthy is that three of the five top-selling sustainable ETFs are “researched enhanced”, that is, not pure index products.

 

Source: LSEG Lipper

 

The Sustainable section has a narrower and stricter focus than those which indicate some form of ESG strategy in their fund documentation—to a smaller group of sustainable funds, defined as all SFDR article 9 funds plus all Lipper Responsible Investment Attribute funds reduced to those containing indicative sustainable keywords in the fund name.

 

Trading Volumes

Chart 6: 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 February was £10.91bn, which accounts for 13.65% of total London Stock Exchange average daily turnover—broadly in line with January’s figures.

The two top-traded ETFs by volume reflected the highest inflows by Lipper Global Classification in chart 3, being Equity Global and Equity US, being iShares MSCI World and S&P 500 products (see table below). That said, chart 6 and the table below don’t give the direction of flow, with Equity UK seeing outflows (see chart 4).

 

Top Traded ETFs on London Stock Exchange in February 2024

Source: LSEG

 

Active ETFs

Chart 7: Active and Passive, Total Net Assets (LHS, %), and Estimated Net Flows (RHS, £bn), February 2024

Source: LSEG Lipper

 

There are 74 active and 1,672 passive ETFs listed on the LSE. Active ETFs total net assets were 1.58% of the total, or £16.43bn. Active ETFs saw inflows of £664m, up from £484m in January, with flows dominated by JP Morgan (see table below). Meanwhile, their passive peers attracted £5.77bn.

 

Table: Five Best-selling Active ETFs, February 2024 (£m)

Source: LSEG Lipper

 

New Listings

Chart 8: New listings on the London Stock Exchange since 2004

Source: LSEG Lipper

 

There have been 35 launches over January and February. Some 18 were over February. Three were equity, one alternatives, and the rest bonds.

Of the 18 launches, only one was active—the alternatives fund from First Trust. Amundi has been busiest, with eight launches, across both equity and bond, followed by Invesco (four launches) and Goldman Sachs (three).

 

New Launches, February 2024

Source: LSEG Lipper

Flows by Promoter

Chart 9: 10 Best-Selling ETF Promoter for ETFs Listed on LSE, February 2024 (£bn)

Source: LSEG Lipper

 

There are 27 promoters with ETFs on the LSE. Four had flows of more than £1bn over February, down from five last week, and impacted by BlackRock dropping (no doubt temporarily) from this list. Ten accounted for flows of more than £100m. Some 18 of the 27 saw inflows.

DWS attracted the largest number of assets, at £1.19bn, with strong flows to equity products (£1.32bn). Second-placed Vanguard took £1.1.7bn, with £747m in equity flows and £418m 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.

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