Q1 2025 was another quarter with strong inflows for the European ETF industry.
These inflows occurred in a volatile and negative market environment in which investors witnessed the peak of the U.S. stock markets in mid-February. While economic fears, especially around the possible tariffs in the U.S., increased, investors around the globe acted nervous over any political and economic news. Investor sentiment was impacted by the growth expectations for future technologies like artificial intelligence after the launch of DeepSeek in China and obviously by the discussions of the impacts of possible tariffs initiated by the U.S. president and potential tit-for-tat reactions from the markets which are the targets of the new tariffs. That said, the tariffs are seen as a kind of trade war between the U.S. and the rest of the world, especially China, by some market observers.
When it comes to this, investors were concerned about a political shift to the right as a result of the general election in Germany in March. Since these concerns did not materialize, German equities started a relief rally, as a possible great coalition seems to be in the favor of investors.
Meanwhile, central banks around the globe adjusted their policies to the current environment by cutting interest rates. These decisions reflect central banks’ efforts to navigate economic challenges, including trade tensions, inflationary trends, and the high market volatility, to support their local economies. With regard to this, it is remarkable that the U.S. Federal Reserve didn’t take any action, as the Fed did not see any need for lower interest rates since economic indicators and inflation numbers for the U.S. were in line with expectations.
Nevertheless, fears of increasing debt in the U.S. and other major economies—which may lead to increasing interest rates—might be the driver for the relatively weak inflows into bond ETFs, while the still somewhat 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 is only a very limited number of indicators which are sending negative signals for economic growth in the U.S. and other major economies. With regard to this, it is noteworthy that most of these negative indicators are being offset by positive signals from other indicators. 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, such as Germany, 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.
Assets Under Management in the European ETF Industry
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 €2,081.8 bn as of December 31, 2024, to €2,103.3 bn at the end of March 2025). At a closer look, the increase in assets under management of €21.5 bn for March was driven by the estimated net inflows (+€87.1 bn), while the performance of the underlying markets contributed (-€65.6 bn) to the assets under management.
Graph 1: Assets Under Management in the European ETF Industry, January 1, 2000 – March 31, 2025 (Euro Billions)
Source: LSEG Lipper
As for the overall structure of the European ETF industry, it was not surprising equity ETFs (€1,568.3 bn) held the majority of assets, followed by bond ETFs (€415.3 bn), money market ETFs (€65.6 bn), commodities ETFs (€43.1 bn), alternatives ETFs (€6.9 bn), and mixed-assets ETFs (€4.0 bn).
Graph 2: Market Share, Assets Under Management in the European ETF Industry by Asset Type, March 31, 2025
Source: LSEG Lipper
ETF Flows by Asset Type
The European ETF industry enjoyed estimated net inflows (+€48.1 bn).
The inflows in the European ETF industry for Q1 2025 were driven by equity ETFs (+€71.3 bn), followed by bond ETFs (+€9.3 bn), money market ETFs (+€5.5 bn), commodities ETFs (+€0.7 bn), and mixed-assets ETFs (+€0.3 bn). On the other side of the table, alternatives ETFs (-€0.1 bn) faced outflows for Q1 2025.
Graph 3: Estimated Net Sales by Asset Type, January 1, 2025 – March 31, 2025 (Euro Billions)
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 March 2025, the European ETF market was split into 177 different classifications. The highest assets under management at the end of March were held by funds classified as Equity U.S. (€517.7 bn), followed by Equity Global (€373.6 bn), Equity Europe (€100.0 bn), Equity Emerging Markets Global (€89.0 bn), and Equity Eurozone (€74.0 bn). These five peer groups accounted for 54.87% of the overall assets under management in the European ETF segment, while the 10-top classifications by assets under management accounted for 64.69%.
Overall, 18 of the 177 classifications each accounted for more than 1% of assets under management. In total, these 18 classifications accounted for €1,590.3 bn, or 75.61%, 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 fully reversed since. Nevertheless, these numbers showed assets under management by Lipper global classifications continued to be highly concentrated in the European ETF industry.
Graph 4: Ten-Top Lipper Global Classifications by Assets Under Management, March 31, 2025 (Euro Billions)
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 5: Ten Smallest Lipper Global Classifications by Assets Under Management, March 31, 2025 (Euro Billions)
Source: LSEG Lipper
Estimated Net Flows by Lipper Global Classifications
The net inflows of the 10 Lipper global classifications with the highest subscriptions accounted for €65.2 bn. In line with the overall sales trend for Q1 2025, equity peer groups (+€60.8 bn) gathered the majority of flows by asset type on the table of the 10 Lipper global classifications with the highest estimated net inflows. Given the overall fund flow trend in the European ETF industry, it was not surprising that Equity Global (+€19.9 bn) was the best-selling Lipper global classification for Q1 2025. It was followed by Equity Europe (+€9.9 bn) and Equity U.S. (+€7.9 bn).
It was quite surprising to witness that Equity Europe enjoyed higher inflows than Equity U.S. over the course of Q1 2025 since European investors have pulled money out of Equity Europe over the course of the previous years. That said, the inflows into Equity Europe may be a new trend in the European ETF industry.
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 6: The Ten Lipper Global Classifications with the Highest Subscriptions and Redemptions, Q1 2025 (Euro Billions)
Source: LSEG Lipper
On the other side of the table, the 10 peer groups with the highest estimated net outflows for March accounted for €6.3 bn in outflows.
Bond USD Corporates (-€1.1 bn) was the Lipper Global Classification with the highest outflows for Q1 2025. The category was bettered by Bond EUR Corporates (-€1.1 bn) and Equity U.K. Small & Mid-Caps (-€0.9 bn).
Insights into the ETF Flows by Lipper Global Classification
March 2025 was another month with strong inflows (+€24.4 bn) for the European ETF industry. These flows drove the overall flows for the first quarter 2025 up to €87.1 bn. Even as the estimated inflows for March were the lowest monthly inflows into ETFs for the year so far, this level of inflows showcases the strong demand for ETFs from European investors. In fact, if the European ETF industry is able to maintain net inflows at the same level as for Q1 for the rest of the year, it would hit an all-time high for annual inflows on a totally different level than before.
As stated above, the inflows in the European ETF industry for Q1 2025 were driven by equity ETFs (+€71.3 bn), followed by bond ETFs (+€9.3 bn), money market ETFs (+€5.5 bn), commodities ETFs (+€0.7 bn), and mixed-assets ETFs (+€0.3 bn). On the other side of the table, alternatives ETFs (-€0.1 bn) were the only asset type facing outflows over the course of Q1 2025.
One might be surprised that ETFs witnessed such high inflows within the negative and volatile market environment over the course of Q1 2025. Generally speaking, it is not unusual to see strong inflows into ETFs when the markets are in limbo because investors seem to prefer liquid and transparent products in turbulent market environments.
When it comes to the above, the high estimated net flows in the equity segment might look like business as usual upon first viewing, as Equity Global (+€19.9 bn) was dominating the table of the 10 best-selling Lipper Global Classifications for the month. A closer look at the 10 best-selling Lipper classifications, however, shows that the negative trend with outflows from Equity Europe (+€9.9 bn) and Equity Eurozone (+€5.1 bn) has broken in 2025, as investors consistently bought into ETFs from these two classifications over the course of Q1 2025. In other words, it looks like European investors are returning to the “old continent” after underweighting it over a long period of time. It was even more surprising to see Equity Sector Industrials as the fourth best-selling classification for Q1 2025. This may signal a change in the general asset allocation since investors were preferring information technology over the other sectors until January 2025. One could interpret this by saying that the launch of DeepSeek in China drove European investors attention back to the real economy.
Talking about China, European investors haven’t been bullish on China since the COVID-19 pandemic as they saw China as an economy with structural challenges, especially in the real estate sector and with the achievement of the projected economic growth, as the population of China is aging on a relatively fast pace compared to other emerging economies. That said, none of the structural challenges have changed so far, but the launch of the DeepSeek AI showcased that China is able to compete with the Western economies even on the highest technology levels. On the back of these trends, Equity China (+€3.9 bn) was the seventh best-selling Lipper classification over the course of Q1 2025.
One of the real surprises in the estimated fund flow trends was the fact that no bond classification was on the table of 10 best-selling Lipper classifications over the course of Q1 2025. Bond Global USD (+€2.0 bn) was the twelfth best-selling classification for the quarter. There were mixed trends in the bond segment when it came to duration, credit quality, or issuers. The most obvious example for this can be found for investment grade corporate bond classifications. While Bond Global Corporates USD (+€1.2 bn), Bond Global Corporates EUR (+€0.3 bn), and Bond Global Corporates in Local Currencies (+€0.3 bn) enjoyed estimated inflows, Bond GBP Corporates (-€0.005 bn), Bond EUR Corporates (-€1.1 bn), and Bond USD Corporates (-€1.1 bn) faced outflows. Again, this a small number, but trends start often with small changes.
In addition to this, it looks like the trend toward money market products has been established as we saw overall inflows into Money Market ETFs (+€5.5 bn) for the quarter, led by Money Market EUR (+€5.1 bn). Given the somewhat low number of available currencies for money market ETFs, it is no surprise that the estimated net flows are far more concentrated than in the segment of mutual funds. However, one needs to bear in mind that the flows into money market products might be a result of the still somewhat inverted yield curves as investors may wanted to harvest higher interest rates with lower duration risk as in the bond segment. That said, we may see that money market ETFs become a safe haven for ETFs investors who want to reduce their overall risk in the bond segment in the future.
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 63 ETF promoters in Europe holding assets at or above €1.0 bn (accounting for €2,097.1 bn overall). The largest ETF promoter in Europe—iShares (€905.5 bn)—accounted for 43.05% of the overall assets under management, far ahead of the number-two promoter—Amundi ETF (€270.1 bn)—and the number-three promoter—Xtrackers (€229.4 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 7: Ten-Top ETF Promoters by Assets Under Management, March 31, 2025 (Euro Billions)
Source: LSEG Lipper
The 10-top promoters accounted for 93.77% of the overall assets under management in the European ETF industry. This meant, in turn, the other 53 fund promoters registering at least one ETF for sale in Europe accounted for only 6.23% of the overall assets under management.
Fund 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 Q1 2025. iShares was the best-selling ETF promoter in Europe for March (+€31.0 bn), ahead of Amundi ETF (+€9.7 bn) and Vanguard (+€9.4 bn).
Graph 8: Ten Best-Selling ETF Promoters, Q1 2025 (Euro Billions)
Source: LSEG Lipper
The flows of the 10-top promoters accounted for estimated net inflows of €75.7 bn. As for the overall flow trend in Q1 2025, it was clear that some of the 63 promoters (seven) faced estimated net outflows (-€0.1 bn in total) over the course of the quarter.
Assets Under Management by ETFs
There were 4,144 instruments (2,090 primary share classes/ETF portfolios and 2,054 convenience share classes) listed as ETFs in the Lipper database at the end of March. Regarding the overall market pattern, it was not surprising assets under management at the ETF level were also highly concentrated. Only 422 of the 2,090 instruments held assets above €1.0 bn each. These products accounted for €1,749.9 bn, or 83.20%, of the overall assets in the European ETF industry. The 10 largest ETFs in Europe accounted for €415.2 bn, or 19.74%, of the overall assets under management.
Graph 9: Ten Largest ETFs by Assets Under Management, March 31, 2025 (Euro Billions)
Source: LSEG Lipper
Estimated Net Flows by ETFs
A total of 1,274 of the 2,090 primary share classes analyzed in this report showed net inflows of more than €10,000 each for Q1 2025, accounting for inflows of €134.5 bn. This meant the other 816 instruments faced no flows or net outflows for the quarter. (When looking at these numbers one needs to bear in mind that some ETFs do not report their assets under management. This means Lipper can’t calculate fund flows for these ETFs). Upon closer inspection, only 287 of the 1,274 ETFs posting net inflows enjoyed inflows of more than €100 m during Q1 2025—for a total of €113.6 bn. The best-selling ETF for Q1 2025 was iShares Core MSCI World UCITS ETF which enjoyed estimated net inflows of €4.0 bn. It was followed by iShares Core S&P 500 UCITS ETF, (+€3.5 bn) and db x-trackers II EONIA UCITS ETF (+€2.9 bn).
Graph 10: Ten Best-Selling ETFs, Q1 2025 (Euro Billions)
Source: LSEG Lipper
The flow pattern at the fund level indicated there was a lot of turnover and rotation during Q1 2025, 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 €25.8 bn.
Given its size and the overall trend for net sales at the promoter level, it was somewhat surprising that only five of the 10 best-selling funds for Q1 2025 were promoted by iShares. These iShares ETFs accounted for estimated net inflows of €13.5 bn. Nevertheless, this shows that the competition in European ETF industry allows also other promoters to join the list of the 10 best-selling ETFs in Europe.
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
