February 2024 was another month with healthy inflows for the European ETF industry. These inflows occurred in a further unstable market environment since the geopolitical tensions in Middle East, especially the Red Sea, increased over the course of the month as the European Union sent military ships to protect commercial vessels from the attacks of Houthi rebels. Nevertheless, since a number of shipping companies avoid nowadays the passage of the Suez channel, it is to be expected that the prolonged delivery times will cause some tensions for the still vulnerable delivery chains.
Market sentiment was further driven by hopes that central banks—especially the U.S. Federal Reserve—have reached the last phase of their fight against high and further increasing inflation rates given their rather dovish statements during/after the respective central bank meetings. That said the statements from the U.S. Fed in January about a possible start of lowering interest rates might have caught some investors on the wrong foot, as the central bank indicated that it may start the lowering of interest rates later and with less steps in 2024 than some investors expected. This statement might have impacted the estimated inflows in bond ETFs. In addition, some investors may have also reviewed their expectations for bonds, as there is the risk that the inflation in the major economies might be more sticky than expected and central banks are held responsible to reach their inflation targets. In addition, there are still some concerns about the possibility of a recession in the U.S. and other major economies around the globe. These fears have been raised by a lack of growth in some economies and the long-term inverted yield curves, which are seen as an early indicator for a possible recession. The normalization of inverted yield curves might be another short-term challenge for the bond markets.
The performance of the underlying markets led, in combination with the estimated net inflows, to increasing assets under management (from €1,608.0 bn as of January 31, 2024, to a new all -time-high of €1,672.9 bn at the end of February). At a closer look, the increase in assets under management of €64.9 bn for February was driven by the performance of the underlying markets (+€48.9 bn), while the estimated net inflows contributed (+€16.0 bn) to the increase in assets under management.
As for the overall structure of the European ETF industry, it was not surprising equity funds (€1,228.0 bn) held the majority of assets, followed by bond funds (€375.4 bn), commodities products (€31.7 bn), money market products (€27.6 bn), alternatives products (€7.1 bn), and mixed-assets funds (€3.1 bn).
Graph 1: Market Share, Assets Under Management in the European ETF Segment by Asset Type, February 29, 2024
Source: LSEG Lipper
Fund Flows by Asset Type
The European ETF industry enjoyed estimated net inflows (+€16.0 bn). These flows were far above the rolling 12-month average (€13.8 bn).
The inflows in the European ETF industry for February were driven by equity ETFs (+€14.5 bn), followed by money market ETFs (+€1.6 bn) and bond ETFs (+€1.0 bn). On the other side of the table, alternatives ETFs (-€0.1 bn), commodities ETFs (-€0.2 bn), and mixed-assets ETFs (-€0.7 bn) faced outflows for February 2024.
Graph 2: Estimated Net Sales by Asset Type, February 2024 (Euro Millions)
Source: LSEG 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 lead to more insights on the structure and concentration of assets within the European ETF industry. At the end of February 2024, the European ETF market was split into 168 different peer groups. The highest assets under management at the end of February were held by funds classified as Equity U.S. (€398.5 bn), followed by Equity Global (€276.9 bn), Equity Europe (€86.5 bn), Equity Emerging Markets Global (€73.3 bn), and Equity Eurozone (€58.3 bn). These five peer groups accounted for 53.40% of the overall assets under management in the European ETF segment, while the 10-top classifications by assets under management accounted for 64.98%.
Overall, 17 of the 168 peer groups each accounted for more than 1% of assets under management. In total, these 17 peer groups accounted for €1,237.5 bn, or 73.98%, 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. That said, the ranking changes at the top of the league table which happened during the COVID-19 pandemic have not reversed since and now represent the new normal. 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 29, 2024 (Euro Millions)
Source: LSEG 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 29, 2024 (Euro Millions)
Source: LSEG Lipper
Fund Flows by Lipper Global Classifications
The net inflows of the 10 best-selling Lipper classifications accounted for €16.7 bn. In line with the overall sales trend for February, equity peer groups (+€12.6 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 Global (+€6.1 bn) was the best-selling Lipper global classification for February. It was followed by Equity U.S. (+€3.9 bn) and Money Market EUR (+€1.1 bn).
These numbers showed the European ETF segment is also highly concentrated when it comes 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 2024 (Euro Millions)
Source: LSEG Lipper
On the other side of the table, the 10 peer groups with the highest estimated net outflows for February accounted for €4.6 bn in outflows. These outflows were above the outflows for 10 peer groups with the highest outflows for January 2024 (€3.4 bn).
Bond EUR Corporates (-€2.2 bn) was the Lipper Global Classification with the highest outflows for the month. The category was bettered by Mixed Asset USD Balanced – Global (-€0.7 bn) and Bond Emerging Markets Global in Hard Currencies (-€2.8 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 26 of the 54 ETF promoters in Europe holding assets at or above €1.0 bn. The largest ETF promoter in Europe—iShares (€747.6 bn)—accounted for 44.69% of the overall assets under management, far ahead of the number-two promoter—Amundi ETF (€227.9 bn)—and the number-three promoter—Xtrackers (€176.1 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 29, 2024 (Euro Millions)
Source: LSEG Lipper
The 10-top promoters accounted for 93.89% of the overall assets under management in the European ETF industry. This meant, in turn, the other 44 fund promoters registering at least one ETF for sale in Europe accounted for only 6.11% 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 all 10 of the 10 largest promoters by assets under management were among the 10-top selling ETF promoters for February. Xtrackers was the best-selling ETF promoter in Europe for February (+€3.0 bn), ahead of UBS ETF (+€2.8 bn) and Amundi ETF (+€2.2 bn).
Graph 7: Ten Best-Selling ETF Promoters, February 2024 (Euro Millions)
Source: LSEG Lipper
The flows of the 10-top promoters accounted for estimated net inflows of €16.3 bn. As for the overall flow trend in February, it was clear that some of the 54 promoters (14) faced estimated net outflows (-€1.4 bn in total) over the course of the month.
Assets Under Management by Funds
There were 3,711 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 356 of the 3,711 instruments held assets above €1.0 bn each. These products accounted for €1,124.1 bn, or 67.19%, of the overall assets in the European ETF industry. The 10 largest ETFs in Europe accounted for €264.4 bn, or 15.81%, 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 29, 2024 (Euro Millions)
Source: LSEG Lipper
ETF Flows by Funds
A total of 1,429 of the 3,711 instruments analyzed in this report showed net inflows of more than €10,000 each for February, accounting for inflows of €44.9 bn. This meant the other 2,282 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 100 of the 1,429 ETFs posting net inflows enjoyed inflows of more than €100 m during February—for a total of €26.5 bn. The best-selling ETF for February was Amundi S&P 500 ESG UCITS ETF EUR ACC, which enjoyed estimated net inflows of €1.4 bn. It was followed by Amundi MSCI USA ESG CI Net Zero Ambition CTB UCITS ETF (+€1.4 bn) and iShares Core MSCI World UCITS ETF (Acc) (+€1.4 bn).
Graph 9: Ten Best-Selling ETFs, February 2024 (Euro Millions)
Source: LSEG 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, since the 10 best-selling ETFs account for inflows of €9.3 bn.
Given its size and the overall trend for net sales at the promoter level, it was surprising that only three of the 10 best-selling funds for February were promoted by iShares. These iShares ETFs accounted for estimated net inflows of €2.7 bn.
The views expressed are the views of the author and not necessarily those of LSEG.
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