August 21, 2017

Monday Morning Memo: Review of the European ETF Market, July 2017

by Detlef Glow

The promoters of ETFs enjoyed net inflows for July. Backed by the net inflows, the assets under management in the European ETF industry (€582.2 bn) increased for July, up from €577.6 bn at the end of June. The increase of €4.6 bn for July was driven by net new sales (+€8.1 bn), while market performance contributed a negative €3.5 bn to the assets under management in the ETF segment. With regard to the overall number of products, it was not surprising that equity funds (€407.0 bn) held the majority of the assets, followed by bond funds (€145.6 bn), commodity products (€17.6 bn), “other” funds (€7.0 bn), money market funds (€4.1 bn), mixed-asset funds (€0.6 bn), and alternative UCITS products (€0.3 bn).

Graph 1: Market Share, Assets Under Management in the European ETF Segment by Asset Type, July 30, 2017

European ETF market Review July 2017

Source: Thomson Reuters Lipper

Fund Flows by Asset Type

Equity ETFs (+€5.4 bn) posted the highest net inflows of the European ETF industry for July, followed by bond ETFs (+€1.9 bn), money market ETFs (+€0.6 bn), commodity ETFs (+€0.3 bn), and mixed-asset ETFs (+€0.03 bn) as well as alternative UCITS ETFs (-€0.01 bn), while “other” ETFs (-€0.1 bn) posted net outflows.

Graph 2: Estimated Net Sales, July 2017 (Euro Millions)

European ETF market Review July 2017

Source: Thomson Reuters Lipper

Assets Under Management by Lipper Global Classifications

With regard to the Lipper global classifications, the European ETF market was split into 156 different peer groups. The highest assets under management at the end of July were held by funds classified as Equity US (€86.7 bn), followed by Equity Eurozone (€51.5 bn), Equity Global (€45.0 bn), and Equity Europe (€33.8 bn) as well as Bond EUR Corporates (€27.3 bn). These five peer groups accounted for 41.96% of the overall assets under management in the European ETF segment, while the ten top classifications by assets under management accounted for 58.01%. Overall, 20 of the 156 peer groups each accounted for more than 1% of the assets under management. In total, these 20 peer groups accounted for €421.8 bn or 72.45% of the overall assets under management. These numbers showed that the assets under management in the European ETF industry continued to be highly concentrated.

Graph 3: Ten Top Lipper Global Classifications by Assets Under Management, July 31, 2017 (Euro Millions)

European ETF market Review July 2017

Source: Thomson Reuters Lipper

The peer groups on the other side of the table showed that some funds in the European ETF market are quite low in assets and may risk being closed in the near future. They are obviously lacking investor interest and might therefore not be profitable for the 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, July 31, 2017 (Euro Millions)

European ETF market Review July 2017

Source: Thomson Reuters Lipper

Fund Flows by Lipper Global Classifications

With regard to the overall sales for July, it was somewhat surprising that only two bond peer groups were among the ten best selling Lipper classifications, since bond ETFs seemed to be investors’ darlings in previous months of the year. The best selling Lipper global classification for July was Equity Eurozone (+€1.5 bn), followed closely by Equity Sector Financials (+€1.2 bn) and Commodity Precious Metals (+€0.7 bn).

The inflows of the ten best selling Lipper classifications equalled to 85.49% of the overall net inflows. These numbers showed that the European ETF segment is also highly concentrated with regard to fund flows by sectors. 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 for and therefore are easy to use for these purposes.

Graph 5: Ten Best and Worst Selling Lipper Global Classifications by Estimated Net Sales, July 2017 (Euro Millions)

European ETF market Review July 2017

Source: Thomson Reuters Lipper

On the other side of the table the ten peer groups with the highest net outflows for July accounted for €1.4 bn of outflows. Commodity Blended (-€0.4 bn) faced the highest net outflows, bettered somewhat by Equity Sector Industrials (-€0.2 bn) and Bond Europe High Yield (-€0.2 bn).

Assets Under Management by Promoters

A closer look at the assets under management in the European ETF industry by promoters also showed high concentration, since only 20 of the 49 ETF promoters in Europe held assets at or above €1.0 bn each. The largest ETF promoter in Europe—iShares (€273.9 bn)—accounted for 47.05% of the overall assets under management, far ahead of the number-two promoter—Xtrackers (€60.3 bn)—and the number-three promoter—Lyxor ETF (€59.9 bn). (To learn more about the concentration of the European ETF market at the promoter level, please read our report: Facts about the concentration in the European ETF industry.)

Graph 6: Ten Top ETF Promoters by Assets Under Management, July 31, 2017 (Euro Millions)

European ETF market Review July 2017

Source: Thomson Reuters Lipper

The ten top promoters accounted for 92.91% of the overall assets under management in the European ETF industry. This meant in turn that the other 39 fund promoters registering at least one ETF for sale in Europe accounted for only 7.09% of the overall assets under management.

Fund Flows by Promoters

Since the European ETF market is highly concentrated, it is not surprising that seven of the ten largest promoters by assets under management were also among the ten top-selling ETF promoters for July. Europe’s largest ETF promoter—iShares—was also the best selling ETF promoter in Europe for July (+€3.6 bn), far ahead of UBS ETF (+€1.6 bn) and Xtrackers (+€1.4 bn).

Graph 7: Ten Best Selling ETF Promoters, July 2017 (Euro Millions)

European ETF market Review July 2017

Source: Thomson Reuters Lipper

Since the flows of the ten top promoters accounted for 113.68% of the overall estimated net flows into ETFs in Europe for July, it was clear that some of the 49 promoters (10) faced net outflows (-€0.9 bn in total) over the course of July.

Assets Under Management by Funds

There were 2,196 instruments (primary funds and convenience share classes) listed as ETFs in the Lipper database at the end of July. With regard to the overall market pattern it was not surprising that the assets under management at the ETF level were also highly concentrated. Only 131 of the 2,196 instruments held assets above €1.0 bn each. These products accounted for €343.3 bn or 58.96% of the overall assets in the European ETF industry. The ten largest ETFs in Europe accounted for €95.5 bn or 16.41% 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: Ten Largest ETFs by Assets Under Management, July 31, 2017 (Euro Millions)

 

Source: Thomson Reuters Lipper

ETF Flows by Funds

A total of 704 of the 2,196 instruments analyzed in this report showed net inflows of more than €10,000 each for July, accounting for €15.8 bn or 193.79% of the overall net flows. This meant in turn that the other 1,492 instruments faced no flows or net outflows for the month. In more detail only 31 of the 704 ETFs posting net inflows enjoyed inflows of more than €100 m each during July, summing to €6.0 bn. The best selling ETF for July, UBS ETF (CH) – Gold (USD) A-dis, accounted for net inflows of €0.7 bn or 8.15% of the overall net inflows; it was followed by iShares EURO STOXX 50 (DE) (+€0.6 bn) and iShares JPM EM Local Gov Bond UCITS ETF USD (Dist) (+€0.4 bn).

Graph 9: Ten Best Selling ETFs, July 2017 (Euro Millions)

European ETF market Review July 2017

Source: Thomson Reuters Lipper

The flow pattern at the fund level showed the concentration even better than the statistics at the promoter or classification level. Even though only four of the ten best selling funds for July were promoted by iShares, these accounted for total net inflows of €1.5 bn or 18.88% of the net inflows into the European ETF segment.

Get In Touch

Subscribe

Related Reports

The promoters of ETFs enjoyed net inflows for October. The assets under management in the ...

After selling its European exchange-traded commodity, currency, and short-and-leveraged ...

Even though there is a lot of talk in Europe around sustainable investments, also known ...

The twelfth annual Thomson Reuters Lipper Alpha Expert Forum was held in London on ...