2024 was another year with strong inflows for the European ETF industry.
In fact, the inflows marked a new all-time high for monthly inflows into ETFs in Europe. These inflows occurred in a mainly positive market environment. While most equity markets were on the rise despite the high valuations of the market leaders over the course of the month, some bond segments faced the impacts from rising rates as yield curves have somewhat started to normalize. This might also be the reason why investors are somewhat nervous and reacting quickly on any news that may impact the current market environment negatively. That said, the election of Donald Trump as the next U.S. president had a positive impact on the U.S. equity market and the U.S. dollar.
That said, investors are not only focusing on 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 up the price of oil. 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 also further driven by the expectations of investors for future central bank decisions. Since the different regions of the world are showing different growth patterns, investors expect less activity from the U.S. Federal Reserve, while they expect much more interest rate cuts from the European Central Bank. As a result, such different central bank activity may lead to a stronger U.S. dollar compared to the euro and other leading currencies. With regard to this, any statement from the Fed and other central banks may have the power to move the bond market in one or the other direction. In addition, fears of increasing debt in the U.S. might be the driver for further increasing interest rates on the long end of the yield curve, which hold back inflows into medium- and long-term bond ETFs, while the still inverted yield curves might be the drivers for the inflows into money market ETFs.
That said, inverted yield curves and especially long-term inverted yield curves are seen as an early indicator for a possible recession. However, there are no signs for a recession in the U.S. and most other major economies visible yet. But even as it looks like the yield curves are slowly normalizing, this does not mean that there is no recession possible in the major economies around the globe. This is especially true as some major economies lack economic growth and may need lower interest rates as stimulus. 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 €1,563.5 bn as of December 31, 2023, to €2,081.8 bn at the end of December). At a closer look, the increase in assets under management of €518.3 bn for 2024 was driven by estimated net inflows, which contributed €256.3 bn to the growth of assets under management, while the performance of the underlying markets added €261.9 bn to the assets under management.
Graph 1: Assets Under Management and Estimated Cumulated Net Flows in the European ETF Industry, January 1, 2000 – December 31, 2024 (in bn EUR)
Source: LSEG Lipper
As for the overall structure of the European ETF industry, it was not surprising equity funds (€1,1565.2 bn) held the majority of assets, followed by bond funds (€413.2 bn), money market products (€53.6 bn), commodities products (€38.3 bn), alternatives products (€7.6 bn), and mixed-assets funds (€3.8 bn).
Given the current market environment, it is no surprise that the overall assets under management in the European ETF industry (€2,081.8 bn) are going from one all-time high to the next month after month. 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 year.
Graph 2: Market Share, Assets Under Management in the European ETF Industry by Asset Type, December 31, 2024
Source: LSEG Lipper
ETF Flows by Asset Type
The European ETF industry enjoyed record inflows (+€256.3 bn) over the course of 2024. These inflows were way above the inflows of the former record year 2021, when ETFs enjoyed estimated year-to-date net flows of €161.4 bn.
Graph 3: Estimated Net Sales, January 1, 2000 – December 31, 2024 (Euro Millions)
Source: LSEG Lipper
The inflows in the European ETF industry for 2024 were driven by equity ETFs (+€198.5 bn), followed by bond ETFs (+€37.7 bn) and money market ETFs (+€21.4 bn). On the other side of table, mixed-assets ETFs (-€0.3 bn), alternatives ETFs (-€0.4 bn), and commodities ETFs (-€0.6 bn) all saw outflows.
Graph 4: Estimated Net Sales by Asset Type, December 2024 (Euro Millions)
Source: LSEG Lipper
Given the current market environment, it was no surprise to see high inflows into ETFs led by equity products over the course of December 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 December 2024, the European ETF market was split into 168 different peer groups. The highest assets under management at the end of December were held by funds classified as Equity U.S. (€558.4 bn), followed by Equity Global (€376.6 bn), Equity Emerging Markets Global (€88.7 bn), Equity Europe (€85.7 bn), and Equity Eurozone (€64.2 bn). These five peer groups accounted for 56.38% of the overall assets under management in the European ETF segment, while the 10-top classifications by assets under management accounted for 66.81%.
Overall, 17 of the 169 peer groups each accounted for more than 1% of assets under management. In total, these 17 peer groups accounted for €1,578.8 bn, or 75.84%, of the overall assets under management.
Graph 5: Ten Largest Lipper Global Classifications by Assets Under Management, December 31, 2024 (Euro Millions)
Source: LSEG Lipper
In addition, it was noteworthy that the rankings of the largest classifications saw some movement in single positions over the last few years. 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 may face the risk of 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, December 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 €211.3 bn. In line with the overall sales trend for 2024, equity peer groups (+€178.4 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. (+€85.2 bn) was the best-selling Lipper global classification for 2024. It was followed by Equity Global (+€64.5 bn) and Money Market EUR (+€11.5 bn). The estimated net flows in Equity U.S. and Equity U.S. Small & Mid Cap show that European investors might expect that the economy in the U.S. may grow faster than other economies.
Money market products continued to gather strong inflows over the course of 2024, repeating the flow trend from 2023. That said, Money Market EUR (+€11.5 bn) and Money Market USD (+€10.6 bn) were on the table of the 10 best-selling Lipper classifications for the year despite the fact that 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 when it comes 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 classification. 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 7: Ten Best- and Worst-Lipper Global Classifications by Estimated Net Sales, 2024 (Euro Millions)
Source: LSEG Lipper
On the other side of the table, the 10 peer groups with the highest estimated net outflows for December accounted for €11.5 bn in outflows. This level of outflows seems to be rather low, but in a year with record high overall inflows, one would expect that the overall outflows are rather limited.
Bond Emerging Markets Global in Local Currencies (-€2.4 bn) was the classification with the highest outflows for the month. It was bettered by Bond USD Government (-€1.9 bn), Equity Theme – Alternative Energy (-€1.2 bn), and Equity Sector Energy (-€1.1 bn).
Insights into ETF Flows over the Course of 2024
Equities (+€198.5 bn) were the best-selling asset type for the year. The inflows into equity ETFs must be seen in comparison to the outflows from actively managed mutual funds (-€62.2 bn). This means that European investors seem to prefer ETFs over mutual funds when it comes to equity investments.
Bonds (+€295.9 bn) were the best-selling asset type in the European fund industry. As such, the comparably low inflows into bond ETFs (+€37.7 bn) were somewhat surprising. That said, one could argue that the market share of the inflows is in line with the market share of the assets under management in the bond segment, but as the European ETF industry is considered a fast-growing part of the European fund industry it is expected to capture a higher market share of the flows. With regard to this, one could say that this flow pattern means that European investors seem to prefer actively managed mutual funds over ETFs in the bond segment.
One reason for this might be a lack of products in classifications such as Bond Global Corporates in Local Currencies or Bond Europe High Yield. In addition to this, there is a lack of available actively managed strategies which might hold flows back since investors may be looking for more active/unconstrained products instead of plain-vanilla index products within the bond segment. The lack of products might be a subject of change, as we might see a lot of promoter activity when it comes to the launch of actively managed bond ETFs in the near future. Additionally, I believe that European investors would appreciate if the choice of target maturity bond ETFs would be enhanced by more maturity dates with different issuers (corporate vs. government) and ratings (investment grade vs. high yield).
That said, investors often need a longer track record for their fund selection process. This, in effect, would mean that active bond ETFs won’t see a lot of investor interest until they have a more robust track record.
In addition to this, the strong inflows into money market ETFs (+€21.4 bn) for the year 2024 were somewhat a surprise, since money market products normally don’t play an important role in the European ETF industry. However, the flows into money market products over the course of 2024 seem to be driven by the inverted yield curves as investors may want to harvest higher interest rates with lower duration risk as in the bond segment.
A view of the best-selling Lipper classifications shows no surprises as ETFs classified as Equity U.S. enjoyed the highest estimated net flows (+€85.2 bn) for 2024. This classification was followed by Equity Global (+€64.5 bn), Money Market EUR (+€11.5 bn), Money Market USD (+€10.6 bn), and Equity U.S. Small & Mid Cap (+€9.6 bn). The inflows into Equity U.S. Small & Mid Cap might be a sign that European investors started to diversify their portfolios over the course of the year 2024, as the market share of the leading stocks in the U.S. equity markets increased further over the course of the year.
With regard to the structure of the bond segment with its multiple layers of performance drivers (base currency, credit rating, issuer, etc.), it was no surprise to see only two bond classifications—Bond Global USD (+€6.0 bn) and Bond EMU Government (+€4.8 bn)—on the list of the 10 best-selling Lipper classifications. As investors use those ETFs which fit their portfolios best, the flows in bond ETFs are widespread over different classifications.
A view of the other side of the league table shows that there are classifications with estimated net outflows even in a record year. Nevertheless, as the altitude of these outflows is very low, these flows can’t be used to determine any trends. Bond Emerging Markets Global in Local Currencies (-€2.4 bn) was the Lipper classification with the highest outflows for the year 2024. It was bettered by Bond USD Government (-€1.9 bn) and Equity Theme – Alternative Energy (-€1.2 bn).
If one would need to make an assumption about the Lipper classifications which faced outflows, it would be fair to say that European investors have in general reduced some of their exposure to more exotic or niche markets.
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 28 of the 59 ETF promoters in Europe holding assets at or above €1.0 bn. The largest ETF promoter in Europe—iShares (€903.6 bn)—accounted for 43.73% of the overall assets under management, far ahead of the number-two promoter—Amundi ETF (€263.7 bn)—and the number-three promoter—Xtrackers (€228.0 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 8: The 10 Largest ETF Promoters by Assets Under Management, December 31, 2024 (Euro Millions)
Source: LSEG Lipper
The 10-top promoters accounted for 95.06% of the overall assets under management in the European ETF industry. This meant, in turn, the other 49 fund promoters registering at least one ETF for sale in Europe accounted for only 4.94% of the overall assets under management.
Graph 9: Market Share of the 10 Largest ETF Promoters by Assets Under Management, December 31, 2024
Source: LSEG Lipper
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 of the 10 largest promoters by assets under management were on the list of the 10-best-selling ETF promoters for 2024. iShares was the best-selling ETF promoter in Europe for 2024 (+€84.8 bn), ahead of Xtrackers (+€36.3 bn) and Amundi ETF (+€28.5 bn).
Graph 10: Ten Best-Selling ETF Promoters, December 2024 (Euro Millions)
Source: LSEG Lipper
The flows of the 10-top promoters accounted for estimated net inflows of €247.3 bn. As for the overall flow trend in 2024, it was clear that some of the 62 promoters (19) which were active in Europe over the course of 2024 faced estimated net outflows (-€7.8 bn in total) over the course of the year.
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.
