Friday Facts: European ETF Industry Review, September 2024

September 2024 was another month 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.

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 U.S. Fed finally cut the Fed funds rate somewhat surprisingly by 50 basis points. Since this interest rate cut was higher than most market observers and investors expected, the decision let 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 development of inflation and the economy. On the other sides of the pond, the Bank of England (BoE) and the Bank of Japan (BoJ) left their interest rates unchanged. While the BoE was focusing on the still high inflation in the U.K., the BoJ had a stable yen in focus. With regard to this, 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 do lack economic growth and may need lower interest rates as stimulus. Nevertheless, some major equity indices reached new all-time highs over the course of the month. Despite these headwinds, the positive effects of lower interest rates seem to be more important for investors than the current state of some economies.

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 €1,879.3 bn as of August 31, 2024, to €1,917.0 bn at the end of September). At a closer look, the increase in assets under management of €37.7 bn for September was driven by the estimated net inflows (+€22.3 bn), while the performance of the underlying markets contributed (+€15.4 bn) to the growth of assets under management.

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 1: 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 strong estimated net inflows (+€22.3 bn) over the course of September which were way above the rolling 12-month average (€18.1 bn). These inflows drove the overall inflows in ETFs up to €167.2 bn for the year 2024 so far. This marks an all-time for the annual inflows into ETFs in Europe.

If European ETFs can maintain their current level of inflows, the overall inflows for the year 2024 will reach a new all-time high, with estimated net inflows between €200.0 bn and €220.0 bn.

The inflows in the European ETF industry for September were driven by equity ETFs (+€15.6 bn), followed by bond ETFs (+€5.5 bn), money market ETFs (+€1.1 bn), commodities ETFs (+€0.1 bn), and mixed-assets ETFs (+€0.03 bn), while alternatives ETFs (-€0.07 bn) faced estimated outflows.

Graph 2: Estimated Net Sales by Asset Type, September 2024 (Euro Millions)

Source: LSEG Lipper

Given the current market environment, it was no surprise to witness high inflows into ETFs led by equity and bond products over the course of September 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 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 3: 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 4: 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 accounted for €19.1 bn. In line with the overall sales trend for September, equity peer groups (+€14.6 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. (+€7.2 bn) was the best-selling Lipper global classification for September. It was followed by Equity Global (+€4.4 bn) and Bond EUR Corporates (+€1.6 bn).

As the flows into money market products have normalized over the course of September 2024, it is somewhat surprising to see Money Market EUR (+€0.6 bn) on the table of the 10 best-selling Lipper classifications for the month, as money market products in general are not a core asset type within the European ETF industry. The estimated inflows in money market products 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 before they return to their normal shape.

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, September 2024 (Euro Millions)

Source: LSEG Lipper

On the other side of the table, the 10 peer groups with the highest estimated net outflows for September accounted for €4.7 bn in outflows. These outflows were above the outflows for 10 peer groups with the highest outflows for August 2024 (€4.0 bn).

After the market turmoil at the beginning of September it was not surprising to see that Equity Japan (-€1.7 bn) was the classification with the highest outflows for the month. It was bettered by Bond USD Government (-€1.4 bn), Equity Sector Energy (-€0.4 bn), and Equity U.K. (-€0.3 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 60 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 6: 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 eight of the 10 largest promoters by assets under management were among the 10-top selling ETF promoters for September. iShares was the best-selling ETF promoter in Europe for September (+€8.5 bn), ahead of Xtrackers (+€4.4 bn) and Amundi ETF (+€2.8 bn).

Graph 7: Ten Best-Selling ETF Promoters, September 2024 (Euro Millions)

Source: LSEG Lipper

The flows of the 10-top promoters accounted for estimated net inflows of €21.9 bn. As for the overall flow trend in September, it was clear that some of the 60 promoters (15) faced estimated net outflows (-€1.0 bn in total) over the course of the month.

Assets Under Management by ETFs

There were 3,869 instruments (primary funds and convenience share classes) listed as ETFs in the Lipper database at the end of September. Regarding the overall market pattern, it was not surprising assets under management at the ETF level were also highly concentrated. Only 411 of the 3,869 instruments held assets above €1.0 bn each. These products accounted for €1,405.5 bn, or 73.32%, of the overall assets in the European ETF industry. The 10 largest ETFs in Europe accounted for €324.6 bn, or 16.93%, 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 10 Largest ETFs by Assets Under Management, September 30, 2024 (Euro Millions)

Source: LSEG Lipper

ETF Flows at Share Class Level

A total of 1,531 of the 3,869 instruments analyzed in this report showed net inflows of more than €10,000 each for September, accounting for inflows of €43.1 bn. This meant the other 2,338 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 96 of the 1,531 ETFs posting net inflows enjoyed inflows of more than €100 m during September—for a total of €25.4 bn. The best-selling ETF for September was iShares Core € Corp Bond UCITS ETF EUR D, which enjoyed estimated net inflows of €1.4 bn. It was followed by iShares Core MSCI World UCITS ETF USD (Acc) (+€1.4 bn) and iShares S&P 500 Equal Weight UCITS ETF USD A (+€1.2 bn).

Graph 9: The 10 Best-Selling ETFs, September 2024 (Euro Millions)

Source: LSEG Lipper

The flow pattern at the fund level indicated there was a lot of turnover and rotation during September, 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 €8.9 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 September were promoted by iShares. These iShares ETFs accounted for estimated net inflows of €4.6 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.