March 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. Nevertheless, since a number of shipping companies these days avoid 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 and March 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. These statements might have impacted the estimated net flows in bond and money market 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 flows, to increasing assets under management (from €1,672.9 bn as of February 29, 2024, to a new all -time-high of €1,720.5 bn at the end of March). At a closer look, the increase in assets under management of €47.7 bn for March was driven by the performance of the underlying markets (+€36.6 bn), while the estimated net inflows contributed (+€11.0 bn) to the increase in assets under management.
As for the overall structure of the European ETF industry, it was not surprising equity funds (€1,270.6 bn) held the majority of assets, followed by bond funds (€376.9 bn), commodities products (€33.9 bn), money market products (€29.3 bn), alternatives products (€6.7 bn), and mixed-assets funds (€3.1 bn).
Graph 1: Market Share, Assets Under Management in the European ETF Segment by Asset Type, March 31, 2024
Source: LSEG Lipper
Fund Flows by Asset Type
The European ETF industry enjoyed estimated net inflows (+€11.0 bn). These flows were below the rolling 12-month average (€13.7 bn).
The inflows in the European ETF industry for March were driven by equity ETFs (+€9.8 bn), followed by money market ETFs (+€1.3 bn), commodities ETFs (+€0.3 bn), and bond ETFs (+€0.2 bn). On the other side of the table, alternatives ETFs (-€0.4 bn) and mixed-assets ETFs (-€0.1 bn) faced outflows for March 2024.
Graph 2: Estimated Net Sales by Asset Type, March 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 March 2024, the European ETF market was split into 168 different peer groups. The highest assets under management at the end of March were held by funds classified as Equity U.S. (€413.7 bn), followed by Equity Global (€288.3 bn), Equity Europe (€81.6 bn), Equity Emerging Markets Global (€75.7 bn), and Equity Eurozone (€61.5 bn). These five peer groups accounted for 53.52% of the overall assets under management in the European ETF segment, while the 10-top classifications by assets under management accounted for 65.05%.
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 €1,274.1 bn, or 74.05%, 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, March 31, 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, March 31, 2024 (Euro Millions)
Source: LSEG Lipper
Fund Flows by Lipper Global Classifications
The net inflows of the 10 best-selling Lipper classifications accounted for €12.9 bn. In line with the overall sales trend for March, equity peer groups (+€10.1 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 (+€3.4 bn) was the best-selling Lipper global classification for March. It was followed by Equity U.S. (+€2.7 bn) and Equity Eurozone (+€1.2 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, March 2024 (Euro Millions)
Source: LSEG Lipper
On the other side of the table, the 10 peer groups with the highest estimated net outflows for March accounted for €6.5 bn in outflows. These outflows were above the outflows for 10 peer groups with the highest outflows for February 2024 (€4.6 bn).
Bond EUR Corporates (-€1.0 bn) was again the Lipper Global Classification with the highest outflows for the month. The category was bettered by Equity Canada (-€1.0 bn) and Bond Emerging Markets Global in Local Currencies (-€1.0 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 27 of the 54 ETF promoters in Europe holding assets at or above €1.0 bn. The largest ETF promoter in Europe—iShares (€768.9 bn)—accounted for 44.69% of the overall assets under management, far ahead of the number-two promoter—Amundi ETF (€225.7 bn)—and the number-three promoter—Xtrackers (€183.2 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, March 31, 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 eight of the 10 largest promoters by assets under management were among the 10-top selling ETF promoters for March. iShares was the best-selling ETF promoter in Europe for March (+€2.9 bn), ahead of Xtrackers (+€2.0 bn) and Vanguard (+€1.6 bn).
Graph 7: Ten Best-Selling ETF Promoters, March 2024 (Euro Millions)
Source: LSEG Lipper
The flows of the 10-top promoters accounted for estimated net inflows of €12.1 bn. As for the overall flow trend in March, it was clear that some of the 54 promoters (17) faced estimated net outflows (-€1.6 bn in total) over the course of the month.
Assets Under Management by Funds
There were 3,734 instruments (primary funds and convenience share classes) listed as ETFs in the Lipper database at the end of March. Regarding the overall market pattern, it was not surprising assets under management at the ETF level were also highly concentrated. Only 378 of the 3,734 instruments held assets above €1.0 bn each. These products accounted for €1,229.3 bn, or 71.45%, of the overall assets in the European ETF industry. The 10 largest ETFs in Europe accounted for €287.2 bn, or 16.70%, 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, March 31, 2024 (Euro Millions)
Source: LSEG Lipper
ETF Flows by Funds
A total of 1,414 of the 3,734 instruments analyzed in this report showed net inflows of more than €10,000 each for March, accounting for inflows of €37.5 bn. This meant the other 2,320 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 93 of the 1,414 ETFs posting net inflows enjoyed inflows of more than €100 m during March—for a total of €20.4 bn. The best-selling ETF for March was iShares Core S&P 500 UCITS ETF USD (Acc), which enjoyed estimated net inflows of €0.9 bn. It was followed by Invesco MSCI USA ESG Univ Screened UCITS ETF Acc (+€0.7 bn) and HSBC S&P 500 UCITS ETF USD (+€0.5 bn).
Graph 9: Ten Best-Selling ETFs, March 2024 (Euro Millions)
Source: LSEG Lipper
The flow pattern at the fund level indicated there was a lot of turnover and rotation during March, 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 €5.3 bn.
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 March were promoted by iShares. These iShares ETFs accounted for estimated net inflows of €2.2 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.
