The first nine months of 2024 were a period with strong inflows for the European ETF industry.
These inflows occurred in a positive market environment. Equity markets were rising further despite the high valuations of the market leaders. This might also be the reason why investors are somewhat nervous and reacting quite fast on any news that may impact the current market environment negatively. An example of this was the short-term market turmoil in August when investors had to unwind their yen-based carry trades after the yen increased sharply in value compared to the U.S. dollar.
This is not only true for economic news, as the increasing 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 these tensions have the potential to drive the price for oil up. In addition, 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.
Even as the European Central Bank (ECB) had lowered the interest rates for the Eurozone in June and September, the market sentiment was further driven by central bank decisions, as all eyes were on the U.S. Federal Reserve before its September meeting. As investors hoped, the Fed finally cut the Fed funds rate. But instead of an expected 25-basis-points (bps) cut, the Fed surprised the market with a 50 bps cut. Since this interest rate cut was higher than most market observers and investors expected, the decision led to a discussion of whether the Fed is expecting a recession in the U.S. or if the central bank is really just comfortable with the developments of inflation and the economy.
On the other sides of the pond, the Bank of England (BoE), which lowered interest rates earlier this year, and the Bank of Japan (BoJ), left their interest rates unchanged during their September meetings. While the BoE was focusing on the still high inflation in the U.K., the BoJ had a stable yen in focus. The statements from the Fed and other central banks might be the driver for estimated net flows in bond and money market ETFs.
In addition to this, it looks like European investors are also adapting their portfolios to the slowly normalizing yield curves. But even if the yield curves return to a normal shape, this does not mean that there is no recession possible in the major economies around the globe since some major economies lack economic growth and may need lower interest rates as stimulus. Nevertheless, a number of major equity indices, including the Nikkei 225, reached new all-time highs over the course of the year so far. That said, it looks like the positive effects of lower interest rates seem to be more important for investors than the current state of some economies.
Assets Under Management – Overview
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 €1,563.5 bn as of December 31, 2023, to €1,917.0 bn at the end of September 2024). At a closer look, the increase in assets under management of €353.5 bn over this period was driven by the performance of the underlying markets (+€186.3 bn), while the estimated net sales contributed €167.2 bn to the growth of assets under management.
Graph 1: Assets Under Management in the European ETF Industry, January 1, 2000 – September 30, 2024
Source: LSEG Lipper
As for the overall structure of the European ETF industry, it was not surprising equity funds (€1,420.3 bn) held the majority of assets, followed by bond funds (€403.8 bn), money market products (€44.7 bn), commodities products (€37.8 bn), alternatives products (€6.9 bn), and mixed-assets funds (€3.6 bn).
It is noteworthy that the overall assets under management in the European ETF industry (€1,917.0 bn) hit a new all-time high at the end of September 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 2: Market Share, Assets Under Management in the European ETF Segment by Asset Type, September 30, 2024
Source: LSEG Lipper
ETF Flows by Asset Type
The European ETF industry enjoyed estimated net inflows (+€167.2 bn) over the course of the first nine months of 2024, which would already mark a new all-time high for inflows over a full year.
With regard to this, it is noteworthy that our model to estimate the fund flows for the full year points to estimated net inflows between €200.0 bn and €220.0 bn for 2024. This level of inflows would be way above the old all-time high for inflows into ETFs in Europe (+€161.4 bn) set over the course of 2021.
Graph 3: Annual Estimated Net Sales by Asset Type, January 1, 2000 – September 30, 2024 (Euro Millions)
Source: LSEG Lipper
The inflows in the European ETF industry for the first nine months of 2024 were driven by equity ETFs (+€119.7 bn), followed by bond ETFs (+€31.8 bn), money market ETFs (+€16.1 bn), and commodities ETFs (+€0.6 bn), while alternatives ETFs (-€0.5 bn) and mixed-assets ETFs (-€0.5 bn) faced estimated outflows.
Graph 4: Estimated Net Sales by Asset Type, January 1 – September 30, 2024 (Euro Millions)
Source: LSEG Lipper
ETFs experienced the opposite of mutual funds, enjoying inflows for every month of 2024 year to date. This flow pattern is also true at the asset type level.
That said, the estimated net flows in ETFs are, as usual, concentrated in bond and equity products. While the estimated monthly flow pattern for bond ETFs is somewhat in line with the pattern for mutual funds, the estimated monthly flow pattern for equity ETFs is quite different from the flow pattern for mutual funds, as equity ETFs enjoyed estimated inflows for every month of the year. Meanwhile, equity mutual funds faced outflows in several months of the year.
Graph 5: Monthly Estimated Net Sales in Equity and Bond ETFs, January 1 – September 30, 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 September 2024, the European ETF market was split into 169 different peer groups. The highest assets under management at the end of September were held by funds classified as Equity U.S. (€468.3 bn), followed by Equity Global (€331.7 bn), Equity Emerging Markets Global (€88.1 bn), Equity Europe (€87.8 bn), and Equity Eurozone (€65.0 bn). These five peer groups accounted for 54.30% of the overall assets under management in the European ETF segment, while the 10-top classifications by assets under management accounted for 65.25%.
It is noteworthy that Equity Emerging Markets moved up from the fourth to the third largest Lipper Global Classification by a thin margin, while Equity Europe moved down from the third to fourth largest classification.
Overall, 16 of the 169 peer groups each accounted for more than 1% of assets under management. In total, these 16 peer groups accounted for €1,411.8 bn, or 73.65%, of the overall assets under management.
Graph 6: Ten Largest Lipper Global Classifications by Assets Under Management, September 30, 2024 (Euro Millions)
Source: LSEG Lipper
In addition, it was noteworthy that the rankings of the largest classifications 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 classifications 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 got into risk-off mode they also reduced 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.
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 7: Ten Smallest Lipper Global Classifications by Assets Under Management, September 30, 2024 (Euro Millions)
Source: LSEG Lipper
ETF Flows by Lipper Global Classifications
The net inflows of the 10 best-selling Lipper classifications over the course of the first nine months of 2024 accounted for €127.1 bn. In line with the overall sales trend for the year so far, equity peer groups (+€98.5 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 (+€41.1 bn) was the best-selling Lipper global classification for the first three quarters of 2024. It was followed by Equity U.S. (+€40.7 bn) and Money Market USD (+€8.9 bn).
The comparably high inflows into money market products might be a sign that European investors want to take profit from the still inverted yield curves or are implementing barbell strategies within their bond portfolios.
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 8: Ten Best- and Worst-Lipper Global Classifications by Estimated Net Sales, January 1 – September 30, 2024 (Euro Millions)
Source: LSEG Lipper
On the other side of the table, the 10 peer groups with the highest estimated net outflows for the first nine months of 2024 accounted for €8.4 bn in outflows.
Bond Emerging Markets Global in Local Currencies (-€1.9 bn) was the Lipper Global Classification with the highest outflows for the first nine months of 2024. The category was bettered by Bond USD Government (-€0.9 bn) and Equity Canada (-€0.9 bn).
European ETF Flow Trend Insights – Year to Date
As mentioned before, it looks like 2024 will be another record year for the European ETF industry, as the estimated net inflows into ETFs in Europe stood at €167.2 bn at the end of September 2024. This level of inflows has never been witnessed before in the European ETF industry. Therefore, it is no surprise that the estimated net inflows for the first nine months of 2024 are already higher than the record inflows for the full year 2021 (€161.4 bn).
A more detailed view of the league table of the Lipper classifications by estimated net flows shows that 104 of the 170 Lipper Global Classifications covered in this report show estimated inflows. Seventy-two of these classifications enjoyed estimated net inflows of more than €100.0 m, while thirty-one enjoyed inflows of more than €1.0 bn.
A view of the estimated net flows at the classification level shows that the inflows over the course of the year 2024 so far are dominated by ETFs classified as Equity Global (€41.1 bn) and Equity U.S. (€40.7 bn). These classifications lead the table by a large margin as the third best-selling classification Money Market USD witnessed “only” estimated net inflows of €8.9 bn. This classification was followed by Money Market EUR (€8.0 bn). Since money market products haven’t been a core asset type in the European ETF industry so far, it is somewhat surprising to see such strong inflows into the respective products. Equity Emerging Markets Global (+€6.6 bn) was the fifth best-selling classification for the year so far and has become the third largest classification by assets under management (€88.1 bn) overall at the end September 2024.
Given the general fund flows trend in the European ETF industry, it can be concluded that the relatively high inflows into money market products were driven by the still inverted yield curves in the major economies and not by a flight to safe havens.
On the other side of the table, Bond Emerging Markets Global in Local Currencies (-€1.9 bn) was the classification with the highest outflows for the year so far. It was bettered by Bond USD Government (€0.9 bn), Equity Canada (€0.9 bn), Equity Theme – Alternative Energy (€0.9 bn), and Equity Sector Energy (€0.8 bn).
Interestingly, Bond Emerging Markets Global in Hard Currencies enjoyed estimated net inflows (€1.7 bn), which may suggest that European investors switched their bond emerging markets exposure from local currencies to hard currencies. Nevertheless, it can’t be said if this assumption is true or not, as the source of flows for ETFs can’t be determined.
Even as the outflows from Bond USD Government were driven by the outflows in September (-€1.4 bn), it is noteworthy that this classification faced outflows over the course of the last four months (-€2.6 bn overall). Conversely, Bond EMU Government enjoyed estimated net inflows of €3.6 bn. With regard to the above, I would not assume that the outflows from Bond USD Government were part of the inflows into Bond EMU Government since the risk profiles of these two classifications are too different.
It might be a bit unusual to see Equity Theme – Alternative Energy and Equity Sector Energy together at the bottom of the table. That said, Equity Theme – Alternative Energy has fallen out of favor with European investors and faced outflows in every month of the year so far, while ETFs in the Equity Sector Energy had to face headwinds from a lack of economic growth in major economies around the world and, therefore, a lower oil price.
It is interesting to see that Equity Japan is still posting estimated net inflows of (€1.0 bn) for the year so far despite outflows of €2.6 bn over the course of the last four months, as it seems that European ETF investors take profits after the market turmoil in August.
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 62 ETF promoters in Europe holding assets at or above €1.0 bn. The largest ETF promoter in Europe—iShares (€847.7 bn)—accounted for 44.22% of the overall assets under management, far ahead of the number-two promoter—Amundi ETF (€246.6 bn)—and the number-three promoter—Xtrackers (€206.0 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 9: The 10 Largest ETF Promoters by Assets Under Management, September 30, 2024 (Euro Millions)
Source: LSEG Lipper
The 10-top promoters accounted for 94.33% of the overall assets under management in the European ETF industry. This meant, in turn, the other 50 fund promoters registering at least one ETF for sale in Europe accounted for only 5.67% 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 all 10 of the 10 largest promoters by assets under management were among the 10-top selling ETF promoters for the first nine months of 2024. iShares (+€59.9 bn) was the best-selling ETF promoter in Europe over the course of 2024 so far, ahead of Xtrackers (+€22.4 bn) and Vanguard (+€18.1 bn).
Graph 10: Ten Best-Selling ETF Promoters, January 1 – September 30, 2024 (Euro Millions)
Source: LSEG Lipper
The flows of the 10-top promoters accounted for estimated net inflows of €163.7 bn. As for the overall flow trend in 2024 so far, it was clear that some of the 62 promoters (19) faced estimated net outflows (-€7.9 bn in total) over the course of the first nine months of 2024.
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.
