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May 14, 2024

LSE-Listed ETF Report: April 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 April 31, 2024 (£bn)

Source: LSEG Lipper

 

Total ETF assets shrank by £12.64bn over April through market moves despite net inflows (see chart 2) shrinking 1.2% over the month but growing 24.4% on an annual basis. Commodity funds saw the greatest growth in percentage terms on a month-on-month basis (8%). Note also that this monthly growth is from a low base, as just 0.9% of ETF assets are held in commodity funds. On an annualised basis, money market ETFs grew the most, at 42.3%, followed by equities (29.4%) and commodities (9.7%). Conversely, mixed-assets ETFs were once more the main negative movers, down to 66.7% of their assets 12 months ago, albeit from a low base—currently 0.1% of ETF assets.

Equity and bond funds comprise the overwhelming majority of the total, at 77.6% and 20.1%, respectively.

 

Flows

Flows by Asset Type

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

Source: LSEG Lipper

 

Total flows were ahead of March’s, at £7.78bn (£99.68bn over 12 months). That said, January exceeded the highest monthly inflows for 2023.

Equity funds netted most of this, at £6.17bn (£79.7bn over 12 months)—even though Europe and the UK both were in a technical recession, which is supposed to send investors scurrying for “safe” assets such as bonds. Nevertheless, year to date has been positive for equities, and flows reflected this.

Unlike for March, all asset class flows were in the black for April, with bond ETFs taking £1.13bn (£17.58bn over 12 months); commodities at £381m (£564m); money market £77m (£2.67bn); mixed assets £14m (-£465m); and alternatives £10m (£362m).

What stands out most from this is the turnaround—however small—of flows to commodity ETFs, an asset class that has been in the red previously.

 

Largest Inflows

Chart 3: Ten Best-Selling Lipper Global Classifications, April 2024 (£bn)

Source: LSEG Lipper

 

Over April, the FTSE 100 led the main FTSE equity indices, followed by Emerging Markets. Overall, though, it was a bad month for the asset classes, as markets fell, driven by sticky inflation (with wages coming in stronger), rising government bond yields, weaker earnings, and the grudging acceptance of “higher for longer”.

Despite this, Equity US (£2.22bn) and Equity Global (£1.84bn) enjoyed strong inflows in keeping with the longer-term trend (£35.43bn and £32.28bn over 12 months respectively). With regards to the former, while there’s some market hesitancy (and uneven performance) with the Magnificent Seven stocks, the table below doesn’t indicate an upsurge in interest in equally weighted large-cap plays, which we saw in the second half of 2023, or other strategies that would steer away from exposure to these stocks.

 

Source: LSEG Lipper

  

Source: LSEG Lipper

 

Likewise, Japan ETFs netted £758m (£4.22bn) on the back of the year’s strong run, April’s poor performance notwithstanding.

In sector terms, using Lipper Global Equity Sector classifications, while it was a strong month for gold and precious metals—with energy also positing a positive return—most others struggled, not least growth areas such as biotech and information technology alongside global real estate. Reflecting this, energy sector ETFs took £257m, although the classification has suffered outflows of £192m over 12 months.

 

Largest Outflows

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

Source: LSEG Lipper

 

At the classification level, outflows are both more muted and evenly distributed than we’ve see in previous months. Emerging markets bore much of the brunt, whether bonds (Global LC, -£304m) or equities: Equity Asia Pacific ex Japan (-£172m); Equity Brazil (-£166m); Equity Emerging Markets Asia (-£154m); and Equity China (-£139m). However, the biggest outflows were from Europe ex UK (-£333m), with developed market corporate bonds suffering as well (EUR, -£302m, and USD, -£277m).

Despite the popularity of Equity US (and “higher for longer” not withstanding in the case of the former), Equity US Income saw £119m redeemed, while its more rate-sensitive small- and mid-cap peer lost £133m.

Equity Sector Consumer Discretionary (-£87m) and Equity Sector Healthcare (-£76m) also saw redemptions, as did—somewhat more surprisingly given performance—Equity Sector Gold & Precious Metals, which suffered outflows of £92m.

 

Sustainable ETFs

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

Source: LSEG Lipper

 

Some £157.59bn of ETF assets on the London Stock Exchange are defined by Lipper Research as sustainable, held across 429 vehicles (see definition below), down from £159.36bn in March. The bulk (83.32%) are equity, with 16.68% in bond vehicles. Mixed-assets funds—always small—have completely dropped from the table.

Total sustainable flows reversed strongly in April, shedding £1.27bn. Sustainable equity ETFs lost £1.33bn (down from £770m inflows in March) while their fixed income peers took a scant £57m.

Despite the popularity for Equity US overall, the three funds with the largest outflows (-£1.29bn in total) were sustainable funds in this classification, overwhelming the fact that this was also the classification best represented in the table below.

 

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 bn) and as a % of Total London Stock Exchange Order Book Turnover

Source: LSEG Lipper

 

The average traded value for ETFs in April was £12.91bn, up from the previous month’s £10.52bn, accounting for 13.99% of total London Stock Exchange average daily turnover, a higher proportion than for the previous month.

The two top-traded ETFs by volume reflected the highest inflows by Lipper Global Classification in chart 3, being Equity US and Equity Global—iShares 500 and S&P MSCI World products: the same as last month, but with the order reversed (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). What’s more, chart 4 will capture the flows for other exchanges on which the ETFs are listed, whereas chart 6 by definition captures UK trades, which is why we see the FTSE 250 appear, as last month—though, again, there’s no indication of the direction.

 

Top Traded ETFs on London Stock Exchange in April 2024

Source: LSEG

 

Active ETFs

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

Source: LSEG Lipper

 

There are 77 active and 1,693 passive ETFs listed on the LSE. Active ETFs total net assets were 1.66% of the total, or £17.54bn. Active ETFs saw inflows of £646m, down from £543m in March, with flows dominated by JP Morgan (see table below). What’s also of note in the table below is that, as in March, all its members are ESG funds, despite the strong outflows for sustainable equity ETFs in general over the period.

Meanwhile, passive ETFs attracted £7.14bn—up on the prior month.

 

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

Source: LSEG Lipper

 

New Listings

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

Source: LSEG Lipper

 

There have been 69 launches year to date. Some 14 were over April. Of the 14 launches this month, 11 were equity, one bond, with L&G launching two commodity vehicles. That’s ahead of the rate of launches for any year since 2018, assuming a steady rate of launches.

Most notably, ARK enters LSE listings with a trio of launches: ARK AI & Robotics UCITS ETF USD Acc, ARK Innovation UCITS ETF USD Acc and ARK Genomic Revolution UCITS ETF USD Acc—all actively managed funds focused on new technologies, with an ethical tilt.

 

New Launches, April 2024

Source: LSEG Lipper

 

Flows by Promoter

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

Source: LSEG Lipper

 

There are 29 promoters with ETFs on the LSE, with ARK being a new entrant with three launches. Two—BlackRock and Vanguard—had flows of more than £1bn over April (£3.63bn and £2.2bn, respectively), compared to one last month. Seven accounted for flows of more than £100m, while six suffered inflows. Flows are therefore of a more “barbell” nature than the previous month, with more of the spoils going to fewer companies and greater outflows at the bottom.

BlackRock saw strong flows to equity products (£3.12bn) and also bonds (£546m). Second-placed Vanguard had its strongest flows into equity funds (£1.86bn).

[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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