General Overview
The global ETF industry enjoyed general inflows over the course of July 2024.
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 $13,055.2 bn as of June 30, 2024, to $13,162.3 bn at the end of July). At a closer look, the increase in assets under management of $107.1 bn for July was driven by estimated net inflows (+$178.1 bn), while the on average negative performance of the underlying markets contributes -$71.0 bn to the growth of the assets under management. Looking at the different product types, the promoters of ETFs (+$164.0 bn) and the promoters of structured notes (+$14.1 bn) enjoyed estimated net inflows over the course of July 2024.
That said, a more detailed view on the estimated net flows by region shows that the fund flows trend were not consistent for all regions as some ETF domiciles faced outflows over the course of July 2024.
Table 1: General Overview on Global Assets Under Management and Estimated Fund Flows by Regions and Major ETF Domiciles (July 31, 2024)
Source: LSEG Lipper
Assets Under Management
Assets under management in the global ETF industry increased from $13,055.2 bn as of June 30, 2024, to $13,162.3 bn at the end of July 2024. The majority of these assets ($10,262.1 bn) were held in equity ETFs. This category was followed by bond ETFs ($2,338.5 bn), commodities ETFs ($202.1 bn), alternatives ETFs ($141.8 bn), ”other” ETFs ($96.7 bn), money market ETFs (€75.7 bn), mixed-assets ETFs ($45.4 bn), and real estate ETFs (€0.02 bn).
Graph 1: Market Share Assets Under Management in the Global ETF Industry by Asset Type – July 31, 2024
Source: LSEG Lipper
Since this report covers a limited number of ETNs and ETCs, the so-called “structured notes” alongside ETFs, it is important to show the market share of assets under management of these products in comparison to ETFs to indicate the relevance and possible impact of these products for this study.
While ETFs held $12,865.3 bn, or 97.74%, of the overall assets under management, the structured notes covered in this report held $292.1 bn, or 2.26%, of the overall assets under management covered in this report at the end of July 2024.
Graph 2: Market Share Assets Under Management in the Global ETF Industry by Product Type – July 31, 2024
Source: LSEG Lipper
Since ETFs are product wrappers which are used for passive index tracking products and active/semi-active strategies, it is important to shed a light on these two different product categories. Market observers expect more growth in the segment of active/semi-active products in the future since an increasing number of active managers are starting to launch ETFs not linked to an index or ETF share classes of existing actively managed mutual funds. It is expected that this trend will continue since the patent on ETF share classes held by Vanguard expired in April 2023.
Nevertheless, it is no surprise that index tracking products held the vast majority of the overall assets under management in the global ETF industry ($12,293.2 bn or 93.40%), while ETFs which aim to outperform an index or are not linked to an index at all held $869.2bn, or 6.60%, of the overall assets under management at the end of July 2024.
Graph 3: Market Share Assets Under Management in the Global ETF Industry by Management Approach – July 31, 2024
Source: LSEG Lipper
Assets Under Management Factor-Based ETFs
Since products which follow a factor-based strategy—the so-called smart beta products—can be found under both product types, it makes sense to highlight the high overall market share of factor-based products. Overall, factor-based products held assets under management of $2,677.1 bn at the end of July, which means in turn these products had an overall market share of 20.34%. The high percentage of the assets under management in factor-based ETFs shows that these products, which have been seen as marketing-driven product launches in the past, have become mainstream investments over time.
Graph 4: Market Share Assets Under Management in the Global ETF Industry Factor-Based ETFs vs Conventional ETFs – July 31, 2024
Source: LSEG Lipper
It is actually no surprise that investors around the globe use factor-based ETFs within their portfolios since these products offer access to a broad range of factors which have proven that they can be exploited to deliver additional returns for investors over longer time periods. Nevertheless, the potential outperformance of a given factor is often dependent on the right timing of the investment since single factors do not deliver a consistent outperformance. With regard to this, it is no surprise that the global ETF industry developed products which use multiple factors. These products shall be easier to use for investors since the usage of multiple factors shall remove the need for market timing.
The graph below shows the variety of factor strategies which are available to investors.
As multifactor ETFs are convenient products, it is no surprise that these products held the highest assets under management in the segment of factor-based ETFs ($1,078.3 bn). They are followed by ETFs using dividends as a selection factor ($433.2 bn), ETFs using the growth factor ($300.0 bn), size factor ETFs ($294.6 bn), and ETFs using the value factor ($271.6 bn).
Graph 5: Market Share Assets Under Management of Single Factors within the Factor-based ETF Universe – July 31, 2024
Source: LSEG Lipper
Assets Under Management ESG-Related ETFs
Since sustainable investing is one of the major topics for investors around the globe, it is no surprise that the global ETF industry offers sustainable products. That said, the products available use different strategies and sustainable investment credentials. With regard to this, it is noteworthy that not all ETFs which have implemented some kind of sustainable investment credentials can be seen as sustainable or ESG products. Nevertheless, this statistic marks all ETFs which state the use of at least one ESG-related credential to determine the constituents of its index as ESG-related, while ETFs which do not use any sustainable investment credentials are marked as conventional ETFs.
Given the fact that most portfolios are still benchmarked against conventional indices, it is not surprising that conventional ETFs ($12499.6 bn) held the vast majority of the assets under management in the global ETF industry while their ESG-related peers held $662.7 bn in assets under management at the end of July 2024.
Graph 6: Market Share Assets Under Management in the Global ETF Industry ESG-Related ETFs vs Conventional ETFs – July 31, 2024
Source: LSEG Lipper
Since there are currently a lot of regulatory initiatives underway to tackle “greenwashing,” especially with regard to the alignment of fund names with the actual fund strategy and the respective usage of ESG credentials within the securities selection process, we might witness a lot of change with regard to the usage of ESG credentials in fund names or the fund related literature. As a consequence, these changes might lead to significantly lower assets under management in ESG-related funds over the course of the next few months since fund and ETF promoters want to avoid being accused practicing greenwashing.
Given the overall market structure of the global ETF industry it is no surprise that equity ETFs ($499.4 bn) held the highest assets under management in the segment of ESG-related ETFs. They were followed by bond ETFs ($127.0 bn), “other” ETFs ($30.1 bn), commodities ETFs ($2.9 bn), alternatives ETFs ($2.2 bn), mixed-assets ETFs ($0.7 bn), and money market ETFs ($0.5 bn).
Graph 7: Market Share Assets Under Management of ESG-Related ETFs by Asset Type – July 31, 2024
Source: LSEG Lipper
Assets Under Management by Region
ETFs domiciled in North America ($9,900.1 bn) held the highest assets under management in the global ETF industry at the end of July 2024. They were followed by ETFs domiciled in Europe ($2,074.9 bn), ETFs domiciled in the Asia Pacific region ($1,162.2 bn), ETFs domiciled in South and Central America ($16.0 bn), and ETFs domiciled in Africa ($9.1 bn).
Graph 8: Assets Under Management in the Global ETF Industry by Region – July 31, 2024 (in mn USD)
Source: LSEG Lipper
In more detail, the U.S. was the largest single country ETF domicile ($9,540.5 bn) at the end of July 2024, followed by Ireland ($1,486.2 bn), Japan ($586.2 bn), Luxembourg ($369.6 bn), and Canada ($359.7 bn). These five ETF domiciles account for assets under management of $12,342.2 bn, or 93.77%, of the overall assets under management in the global ETF industry.
Assets Under Management by Lipper Global Classification
Equity U.S. held by far the highest assets under management ($4,539.9 bn) of the 281 Lipper Global Classifications covered in this report. It was followed by Equity U.S. Small & Mid Cap ($850.2 bn), Equity Global ex-U.S. ($742.3 bn), Equity Japan ($625.2 bn), and Equity Global ($497.4 bn).
Graph 9: The 20 Largest Lipper Global Classifications by Assets Under Management – July 30, 2024 (in mn USD)
Source: LSEG Lipper
A closer review of the assets under management by Lipper Global Classification shows that the 10 largest classifications held $9,066.9 bn, or 68.88%, of the overall assets under management of the global ETF industry, while the largest 20 classifications account for $10,568.7 bn, or 80.30%, of the overall assets under management in the global ETF industry at the end of July 2024.
Assets Under Management by Promoters
BlackRock (iShares) is the largest promoter of ETFs globally ($4,051.6 bn). It is followed by Vanguard ($2,991.7 bn), State Street Global Advisors (SPDR) ($1,481.6 bn), Invesco ($667.3 bn), and Charles Schwab Investment Management ($363.7 bn).
Graph 10: Assets Under Management of the 20 Largest ETF Promoters Globally – July 31, 2024 (in mn USD)
Source: LSEG Lipper
As graph 10 shows, the assets under management in the global ETF industry are even more highly concentrated at the promoter level than at the domicile or classification level.
The three top ETF promoters globally account for assets under management of $8,525.0 bn, or 64.77%, of the overall assets under management, while the 10 top promoters account for $10,691.5 bn, or 81.24%, of the overall assets under management and the 20 top promoters account for $11,720.5 bn, or 89.05%, of the assets under management held by ETFs globally.
Global ETF Flows
The global ETF industry enjoyed healthy overall inflows of $178.1 bn over the course of July 2024. These flows drove the overall inflows in the global ETF industry up to $812.1 bn for 2024 overall.
As mentioned before, this report covers a limited number of structured notes alongside ETFs. It is important to split the overall estimated fund flows between these two product types to indicate the relevance and possible impact of structured notes for this study.
ETFs enjoyed estimated net inflows of $164.0 bn over the course of July, while structured notes had estimated net inflows of $14.1 bn over the same time period.
Graph 11: Estimated Net Sales by Product Type, July 1, 2024 – July 31, 2024 (in mn USD)
Source: LSEG Lipper
As mentioned before, ETFs can be managed with different approaches. They may use a passive approach (index tracking) where the portfolio of the respective ETF is tied to an index, or an active/semi-active approach where the fund manager has the aim to outperform an index or is not linked to an index at all.
Index tracking products enjoyed the vast majority of the estimated net inflows (+$150.3 bn) over the course of the month, while active/semi-active products enjoyed estimated net inflows of $27.8 bn over the same time period.
Graph 12: Estimated Net Sales by Management Approach, July 1, 2024 – July 31, 2024 (in mn USD)
Source: LSEG Lipper
These flow numbers show that there is a trend toward active/semi-active ETFs since the market share of the overall estimated net flows of these products (15.63%) is much higher than their market share of the assets under management (6.60%). This means active/semi-active products grow faster than the overall ETF industry and will therefore grow their market share relative to other ETF categories.
Global ETF Flows in Factor-Based ETFs
Since products which follow a factor-based strategy held a high overall market share of the assets under management in the global ETF industry, it makes sense to review the estimated net flows for these products. Especially as some market observers have already stated that active/semi-active ETFs may displace factor-based ETFs in the near future. That said, this statement can’t be proven by fund flow numbers since factor-based products enjoyed inflows of $13.2 bn over the course of July, while their conventional peers posted inflows of $164.9 bn.
Nevertheless, compared to the overall estimated net inflows into ETFs globally the market share of factor-based ETFs from the estimated overall ETF flows (7.43%) is lower than their market share of assets under management (20.34%).
Graph 13: Estimated Net Flows in the Global ETF Industry Factor-Based ETFs vs Conventional ETFs – July 1, 2024 – July 31, 2024 (in mn USD)
Source: LSEG Lipper
Size was the best-selling strategy within the segment of factor-based ETFs (+$7.0 bn). They are followed by ETFs using the dividend factor (+$2.2 bn), ETFs using multiple factors (+$1.3 bn), momentum factor ETFs (+$1.0 bn), and ETFs using the quality factor (+$0.8 bn).
Graph 14: Estimated Net Flows of Single Factors Within the Segment of Factor-Based ETFs – July 1, 2024 – July 31, 2024 (in mn USD)
Source: LSEG Lipper
On the other side of the fund flows league table, factor-based ETFs using the volatility factor (-$0.4 bn) were facing the highest outflows. The category was bettered by ETFs using the beta factor (-$0.1 bn) and ETFs using the commodity strategies factors (-$0.01 bn).
Global ETF Flows in ESG-Related ETFs
Given the fact that sustainable investing is a hot topic in the global investment industry, it is surprising that ESG-related ETFs enjoyed estimated net inflows of only $6.4 bn over the course of July. These inflows must be seen in the light of the ongoing discussions about greenwashing and the regulatory as well as political headwinds in some jurisdictions.
Graph 15: Estimated Net Flows in the Global ETF Industry ESG-related ETFs vs Conventional ETFs – July 1, 2024 – July 31, 2024 (in mn USD)
Source: LSEG Lipper
With regard to the overall market structure and the general fund flow trend, it is not surprising that bond ETFs (+$3.7 bn) enjoyed the highest estimated net inflows in the segment of ESG-related ETFs for July. They were followed by equity ETFs (+$1.8 bn), “other” ETFs (+$0.9 bn), money market ETFs (+$0.1 bn), commodities ETFs (+$0.03 bn), alternatives ETFs (+$0.02 bn), and mixed-assets ETFs (+$0.01 bn).
Graph 16: Estimated Net Flows of ESG-related ETFs by Asset Type – July 1, 2024 – July 31, 2024 (in mn USD)
Source: LSEG Lipper
Global ETF Flows by Region
By reviewing the estimated flows in the global ETF industry by fund domicile and the respective regions, one needs to bear in mind that some domiciles have specific advantages or disadvantages when it comes to ETF distribution. The U.S. is, for example, a single market and can take profit from the size of the overall market, while in Europe every market is or at least can be an ETF domicile, which means that the local markets are much smaller.
That said, the EU countries have established a fund regulation (Undertakings in Collective Investments and Transferable Securities, or UCITS) which enables the fund and ETF industry to cross-list all products which are registered for sale in one EU country into another EU country. Since UCITS has become such a well-recognized regulation standard for mutual funds and ETFs, some countries in South and Central America, as well in Asia, allow UCITS funds to be cross-listed and sold to local investors. It is fair to say that there is no other regulatory framework available that allows funds to be distributed in various countries around the globe. Other mutual recognition agreements, such as those between Hong Kong and China or Hong Kong and Taiwan, are only bilateral and have no global reach. This means that the estimated flows for European ETFs July also include flows from South and Central America, as well as from Asia.
As to be expected, ETFs domiciled in North America (+$140.4 bn) enjoyed the highest estimated net inflows for July 2024. They were followed by ETFs domiciled in Europe (+$22.0 bn), Asia Pacific (+$16.0 bn), and (South) Africa (+$0.1 bn). Meanwhile, South and Central America (-$0.3 bn) was the only region facing outflows from ETFs.
Graph 17: Estimated Net Flows in the Global ETF Industry by Region, July 1, 2024 – July 30, 2024 (in mn USD)
Source: LSEG Lipper
In more detail, the U.S. (+$135.9 bn) was the single fund domicile with the highest estimated net inflows for July. It was followed by Ireland (+$16.7 bn) and Taiwan (+$8.0 bn).
Global ETF Flows by Asset Type
Given the overall market environment, it was not surprising that equity ETFs (+$99.6 bn) were the best-selling asset type for July 2024. They were followed by bond ETFs (+$54.3 bn), alternatives ETFs (+$17.1 bn), money market ETFs (+$3.8 bn), commodities ETFs (+$2.7 bn), mixed-assets ETFs (+$0.6 bn), “other” ETFs (+$0.02 bn), and real estate ETFs (+$0.001 bn).
Graph 18: Estimated Net Sales by Asset Type, July 1, 2024 – July 31, 2024 (in mn USD)
Source: LSEG Lipper
The fact that equities were the best-selling asset type for the month might be a sign that investors are further in risk-on mode with regard to their risk appetite. In addition, the strong inflows into bond ETFs might be seen as a sign that investors may anticipate a possible ending of the interest hiking cycle of central banks around the globe led by the European Central Bank and the Bank of England and followed by the U.S. Federal Reserve. Therefore, this positioning might be seen as a bet that inflation will go down further despite some still somewhat hawkish statements made by central bankers in the EU and the U.S.
The inflows for July 2024 drove the overall estimated inflows for the year 2024 so far up to $812.1 bn. Equity ETFs (+$507.7 bn) were the best-selling asset type for the year so far, followed by bond ETFs (+$224.1 bn), alternatives ETFs (+$64.2 bn), money market ETFs (+$15.3 bn), mixed-assets ETFs (+$2.7 bn), and real estate ETFs (+$0.001 bn). On the other side of the table, “other” ETFs (-$1.8 bn) and commodities ETFs (-$0.2 bn) faced estimated net outflows for the year so far.
Graph 19: Estimated Net Sales by Asset Type, January 1, 2024 – July 31, 2024 (in mn USD)
Source: LSEG Lipper
Global ETF Flows by Lipper Global Classifications
A closer look at the best and worst Lipper Global Classifications by estimated net flows for July shows that investors are further in risk-on mode with regard to their risk appetite. This is because the table of the 10 best-selling Lipper Global Classifications is composed of four equity, three bond, and three alternatives classifications. Equity U.S. (+$62.3 bn) was the best-selling classification for the month. The category was followed by Alternative Currency Strategies (+$14.4 bn), Bond USD Corporates (+$9.7 bn), Equity U.S. Small- and Mid-Cap (+$8.5 bn), and Bond USD Government (+$7.4 bn).
Graph 20: Ten Best- and Worst Lipper Global Classifications by Estimated Net Sales, July 1, 2024 – July 31, 2024 (in mn USD)
Source: LSEG Lipper
On the other side of the table, Equity Japan (-$2.4 bn) faced the highest outflows. It was bettered by Equity China (-$2.3 bn), Equity Europe (-$1.8 bn), Alternative Dedicated Short Bias (-$1.3 bn), and Commodity Blended (-$1.1 bn).
More generally, the flow trends for the classifications with the highest estimated outflows in July indicate that investors adjusting their portfolios to the current economic environment while at the same time reducing their exposure to Japanese equities after the announcement that the Bank of Japan may hike interest rates at the end of July 2024.
Given that Alternative Currency Strategies (+$0.7 bn) enjoyed only relatively high inflows might be a sign that the investor had a lot interest in spot Ethereum ETFs since these products have been approved in the U.S., and are classified as Alternative Currency Strategies in the Lipper database.
Global ETF Flows by Promoters
BlackRock (+$35.6 bn) was the best-selling ETF promoter globally for the month, slightly ahead of Vanguard (+$35.2 bn), State Street Global Advisors (+$29.2 bn), Invesco (+11.8 bn), and Grayscale (+9.2 bn).
Graph 21: Twenty Best-Selling ETF Promoters Globally, July 1, 2024 – July 31, 2024 (in mn USD)
Source: LSEG Lipper
Overall, the 20 best-selling ETF promoters account for estimated net inflows of $157.3 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 LSEG Lipper or LSEG.
