September 18, 2017

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

by Detlef Glow

The promoters of ETFs enjoyed net inflows for August. The assets under management in the European ETF industry (€582.6 bn) increased for August, up from €581.1 bn at the end of July. The increase of €1.4 bn for August was driven by net new sales (+€3.1 bn), while the performance of the underlying markets and currencies contributed a negative €1.7 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 (€404.9 bn) held the majority of the assets, followed by bond funds (€147.7 bn), commodity products (€17.9 bn), “other” funds (€7.2 bn), money market funds (€4.0 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, August 30, 2017

Review of the European ETF industry, August 2017

Source: Thomson Reuters Lipper

Fund Flows by Asset Type

Bond ETFs (+€2.1 bn) posted the highest net inflows of the European ETF industry for August, followed by equity ETFs (+€1.0 bn), “other” ETFs (+€0.2 bn), mixed-asset ETFs (+€0.006 bn), and alternative UCITS ETFs (+€0.00004 bn), while commodity ETFs (-€0.1 bn) and money market ETFs (-€0.1 bn) posted net outflows.

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

Review of the European ETF industry, August 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 August were held by funds classified as Equity US (€86.8 bn), followed by Equity Eurozone (€50.5 bn), Equity Global (€44.4 bn), and Equity Europe (€33.9 bn) as well as Bond EUR Corporates (€27.7 bn). These five peer groups accounted for 41.77% of the overall assets under management in the European ETF segment, while the ten top classifications by assets under management accounted for 57.90%. 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 €422.4 bn or 72.51% of the overall assets under management. In addition, it is noteworthy that the ranking of the largest peer groups was quite stable, indicating that European investors use the funds from these peer groups as core holdings and not only as so-called satellites that are bought and sold quite frequently to implement asset allocation views in their portfolios. These numbers show 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, August 31, 2017 (Euro Millions)

Review of the European ETF industry, August 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, August 31, 2017 (Euro Millions)

Review of the European ETF industry, August 2017

Source: Thomson Reuters Lipper

Fund Flows by Lipper Global Classifications

With regard to the overall sales for August, it was somewhat surprising that only four bond peer groups were among the ten best selling Lipper classifications, since bond ETFs were investors’ darlings for the month. The best selling Lipper global classification for August was Equity US (+€0.5 bn), followed closely by Equity Sector Financials (+€0.4 bn) and Equity Europe (+€0.4 bn).

The inflows of the ten best selling Lipper classifications equalled to 104.31% 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, August 2017 (Euro Millions)

Review of the European ETF industry, August 2017

Source: Thomson Reuters Lipper

On the other side of the table the ten peer groups with the highest net outflows for August accounted for €1.5 bn of outflows. Equity Global (-€0.3 bn), one of the favoured peer groups of European investors, faced the highest net outflows, bettered somewhat by Equity Eurozone (-€0.3 bn) and Equity Japan (-€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 19 of the 48 ETF promoters in Europe held assets at or above €1.0 bn each. The number of ETF promoters in Europe was reduced by one, since Invesco Powershares finalized the takeover of Source on August 18, 2017. This takeover brought Invesco Powershares (€13.6 bn) up to number eight in the ranking of the ETF promoters in Europe by assets under management. In this regard, the assets under management held in third-party funds have been excluded from this number, since these ETFs are promoted under different brands. The largest ETF promoter in Europe—iShares (€274.9 bn)—accounted for 47.19% of the overall assets under management, far ahead of the number-two promoter—Xtrackers (€60.2 bn)—and the number-three promoter—Lyxor ETF (€58.9 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, August 31, 2017 (Euro Millions)

Review of the European ETF industry, August 2017

Source: Thomson Reuters Lipper

The ten top promoters accounted for 93.21% of the overall assets under management in the European ETF industry. This meant in turn that the other 38 fund promoters registering at least one ETF for sale in Europe accounted for only 6.79% of the overall assets under management.

Fund Flows by Promoters

Since the European ETF market is highly concentrated, it was somewhat surprising that only four of the ten largest promoters by assets under management were among the ten top-selling ETF promoters for August. Nevertheless, Europe’s largest ETF promoter—iShares—was still also the best selling ETF promoter in Europe for August (+€1.8 bn), far ahead of SPDR (+€0.4 bn) and Vanguard Group (+€0.3 bn).

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

Review of the European ETF industry, August 2017

Source: Thomson Reuters Lipper

Since the flows of the ten top promoters accounted for 109.66% of the overall estimated net flows into ETFs in Europe for August, it was clear that some of the 48 promoters (16) faced net outflows (-€0.4 bn in total) over the course of August.

Assets Under Management by Funds

There were 2,241 instruments (primary funds and convenience share classes) listed as ETFs in the Lipper database at the end of August. 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 129 of the 2,241 instruments held assets above €1.0 bn each. These products accounted for €342.4 bn or 58.77% 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, August 31, 2017 (Euro Millions)

Review of the European ETF industry, August 2017

Source: Thomson Reuters Lipper

ETF Flows by Funds

A total of 668 of the 2,241 instruments analyzed in this report showed net inflows of more than €10,000 each for August, accounting for €12.2 bn or 392.78% of the overall net flows. This meant in turn that the other 1,573 instruments faced no flows or net outflows for the month. In more detail only 22 of the 668 ETFs posting net inflows enjoyed inflows of more than €100 m each during August, summing to €3.9 bn. The best selling ETF for August, iShares Core S&P 500 UCITS ETF USD (Acc), accounted for net inflows of €0.4 bn or 12.74% of the overall net inflows; it was followed by iShares Core DAXUCITS ETF (DE) (+€0.3 bn) and ComStage S&P 500 UCITS ETF (+€0.3 bn).

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

Review of the European ETF industry, August 2017

Source: Thomson Reuters Lipper

The flow pattern at the fund level indicates that there was a lot of turnover and rotation during August, but it also shows the concentration of the European ETF industry even better than the statistics at the promoter or classification level. Five of the ten best selling funds for August were promoted by iShares; these accounted for total net inflows of €1.4 bn or 45.66% of the net inflows into the European ETF segment.

Find out more about Thomson Reuters Lipper, the global leader in independent fund performance data.

Get In Touch

Subscribe

Related Reports

European Fund-Flow Trends, September 2017 September was the ninth consecutive month ...

In his novel, “War and Peace,” Leo Tolstoy rants at the idiocy of the intelligentsia ...

The promoters of ETFs in Europe enjoyed net inflows for September. The assets under ...

Over the last few weeks the fund markets have seen two major players in active fund ...