July 2024 was another month with strong inflows for the European ETF industry.
These inflows occurred in a positive market environment. Nevertheless, equity markets looked somewhat vulnerable given the high valuations of the market leaders. With regard to this, it is not surprising that investors are nervous and reacting quite fast on any news that may impact the current market environment negatively.
This is not only true for economic news, as the geopolitical tensions in the Middle East, especially the developments around the Red Sea, are seen as a risk for the general economic growth in Western countries since a number of shipping companies these days avoid the passage of the Suez channel. It is, therefore, to be expected that prolonged delivery times will cause some tensions for the still vulnerable delivery chains.
Market sentiment was further driven by hopes that central banks will start to lower key interest rates. While the European Central Bank (ECB) and the Bank of England (BoE) started to lower interest rates, it is still unclear if and when the U.S. Federal Reserve will start to lower the interest rates in the U.S. That said, the latest statements from the U.S. Fed on its expectations for the start of lowering interest rates might have caught some investors on the wrong foot since 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.
As a result, some investors may have reviewed their expectations for bonds, as there is the risk that inflation in the major economies might be more sticky than expected and central banks are held responsible to reach their inflation targets. Additionally, 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.
From an ETF industry perspective, the performance of the underlying markets led, in combination with the estimated net flows, to increasing assets under management (from €1,814.2 bn as of June 30, 2024, to €1,850.2 bn at the end of July). At a closer look, the increase in assets under management of €36.0 bn for July was driven by the estimated net inflows (+€20.9 bn), while the performance of the underlying markets contributed (+€15.1 bn) to the growth of the assets under management.
As for the overall structure of the European ETF industry, it was not surprising equity funds (€1,369.1 bn) held the majority of assets, followed by bond funds (€393.3 bn), money market products (€41.1 bn), commodities products (€36.1 bn), alternatives products (€7.2 bn), and mixed-assets funds (€3.4 bn).
It is noteworthy that the overall assets under management in the European ETF industry (€1,850.2 bn) hit a new all-time high at the end of July 2024. With regard to this, it is no surprise that the assets under management for equity, bond, and money market ETFs also marked an all-time high at the end of the month.
Graph 1: Market Share, Assets Under Management in the European ETF Segment by Asset Type, July 31, 2024
Source: LSEG Lipper
ETF Flows by Asset Type
The European ETF industry enjoyed strong estimated net inflows (+€20.9 bn) over the course of July. These flows were way above the rolling 12-month average (€16.2 bn). If the European ETF can maintain the current level of inflows, the overall inflows for the year 2024 will reach a new all-time high with estimated net inflows between €180.0 bn and €210.0 bn.
The inflows in the European ETF industry for July were driven by equity ETFs (+€11.2 bn), followed by bond ETFs (+€6.9 bn), money market ETFs (+€2.9 bn), alternatives ETFs (+€0.3 bn), and mixed-assets ETFs (+€0.1 bn), while commodities ETFs (-€0.5 bn) faced outflows.
Graph 2: Estimated Net Sales by Asset Type, July 2024 (Euro Millions)
Source: LSEG Lipper
Given the fact that money market ETFs normally play only a minor role in the European ETF industry, it was surprising to witness relatively high inflows into these products over the course of July 2024.
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 July 2024, the European ETF market was split into 167 different peer groups. The highest assets under management at the end of July were held by funds classified as Equity U.S. (€451.4 bn), followed by Equity Global (€317.3 bn), Equity Europe (€85.6 bn), Equity Emerging Markets Global (€81.5 bn), and Equity Eurozone (€61.9 bn). These five peer groups accounted for 53.92% of the overall assets under management in the European ETF segment, while the 10-top classifications by assets under management accounted for 65.38%.
Overall, 16 of the 167 peer groups each accounted for more than 1% of assets under management. In total, these 16 peer groups accounted for €1,362.3 bn, or 73.63%, 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 Largest Lipper Global Classifications by Assets Under Management, July 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, July 31, 2024 (Euro Millions)
Source: LSEG Lipper
ETF Flows by Lipper Global Classifications
The net inflows of the 10 best-selling Lipper classifications accounted for €16.1 bn. In line with the overall sales trend for July, equity peer groups (+€10.2 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 U.S. (+€4.6 bn) was the best-selling Lipper global classification for July. It was followed by Equity Global (+€3.8 bn) and Money Market USD (+€1.6 bn).
It is surprising to witness two money market classifications in the top half of the 10 best-selling Lipper classifications, since money market is in general not a core asset type within the European ETF industry. The estimated inflows in these classifications may be an indicator that European investors have become cautious with regard to their positioning on the respective yield curves and may want to take profit from the elevated interest rate level on the short end of the yield curves.
More generally, 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-Lipper Global Classifications by Estimated Net Sales, July 2024 (Euro Millions)
Source: LSEG Lipper
On the other side of the table, the 10 peer groups with the highest estimated net outflows for July accounted for €2.8 bn in outflows. These outflows were below the outflows for 10 peer groups with the highest outflows for June 2024 (€3.3 bn).
Commodity Blended (-€0.7 bn) was the Lipper Global Classification with the highest outflows for the month. The category was bettered by Equity China (-€0.4 bn) and Equity Japan (-€0.4 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 29 of the 57 ETF promoters in Europe holding assets at or above €1.0 bn. The largest ETF promoter in Europe—iShares (€820.7 bn)—accounted for 44.36% of the overall assets under management, far ahead of the number-two promoter—Amundi ETF (€239.2 bn)—and the number-three promoter—Xtrackers (€198.0 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: The 10 Largest ETF Promoters by Assets Under Management, July 31, 2024 (Euro Millions)
Source: LSEG Lipper
The 10-top promoters accounted for 94.01% of the overall assets under management in the European ETF industry. This meant, in turn, the other 47 fund promoters registering at least one ETF for sale in Europe accounted for only 5.99% of the overall assets under management.
ETF 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 July. iShares was the best-selling ETF promoter in Europe for July (+€7.4 bn), ahead of Amundi ETF (+€3.9 bn) and Vanguard (+€2.4 bn).
Graph 7: Ten Best-Selling ETF Promoters, July 2024 (Euro Millions)
Source: LSEG Lipper
The flows of the 10-top promoters accounted for estimated net inflows of €20.1 bn. As for the overall flow trend in July, it was clear that some of the 57 promoters (11) faced estimated net outflows (-€0.6 bn in total) over the course of the month.
Assets Under Management by ETFs
There were 3,831 instruments (primary funds and convenience share classes) listed as ETFs in the Lipper database at the end of July. Regarding the overall market pattern, it was not surprising assets under management at the ETF level were also highly concentrated. Only 400 of the 3,831 instruments held assets above €1.0 bn each. These products accounted for €1,346.5 bn, or 72.78%, of the overall assets in the European ETF industry. The 10 largest ETFs in Europe accounted for €312.2 bn, or 16.87%, 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: The Ten Largest ETFs by Assets Under Management, July 31, 2024 (Euro Millions)
Source: LSEG Lipper
ETF Flows on Share Class Level
A total of 1,530 of the 3,831 instruments analyzed in this report showed net inflows of more than €10,000 each for July, accounting for inflows of €43.0 bn. This meant the other 2,301 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 98 of the 1,530 ETFs posting net inflows enjoyed inflows of more than €100 m during July—for a total of €24.3 bn. The best-selling ETF for July was iShares S&P 500 Swap UCITS ETF USD (Acc), which enjoyed estimated net inflows of €1.0 bn. It was followed by iShares $ Treasury Bond 0-1yr UCITS ETF USD A (+€0.9 bn) and Invesco S&P 500 UCITS ETF Acc (+€0.9 bn).
Graph 9: The 10 Best-Selling ETFs, July 2024 (Euro Millions)
Source: LSEG Lipper
It is remarkable that six of the 10 best-selling ETFs in Europe were either ETFs which track the S&P 500 or are related to that index (equal weighted, research enhanced).
The flow pattern at the fund level indicated there was a lot of turnover and rotation during July, 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 €6.9 bn.
Given its size and the overall trend for net sales at the promoter level, it was surprising that only two of the 10 best-selling funds for July were promoted by iShares. These iShares ETFs accounted for estimated net inflows of €1.9 bn.
