The promoters of exchange-traded funds (ETFs) enjoyed net inflows for December. Positive market impacts in combination with net inflows led to increased assets under management in the European ETF industry (€514.5 bn) for December, up from €495.8 bn at the end of November. The increase of €18.7 bn for December was mainly driven by the performance of the markets (+€13.8 bn), while net sales contributed €5.0 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 (€356.4 bn) held the majority of the assets, followed by bond funds (€132.0 bn), commodity products (€15.9 bn), “other” funds (€6.5 bn), money market funds (€2.9 bn), mixed-asset funds (€0.4 bn), and alternative UCITS products (€0.4 bn).
Graph 1: Market Share, Assets Under Management in the European ETF Segment by Asset Type, December 31, 2016
Source: Thomson Reuters Lipper
Fund Flows by Asset Type
Equity ETFs (+€4.5 bn) posted their third consecutive month of having the highest net inflows in the European ETF industry for December, followed by bond ETFs (+€0.8 bn), commodity ETFs (+€0.1 bn), mixed-asset ETFs (+€0.02 bn), and money market ETFs (+€0.001 bn). On the other side of the table “other” ETFs (-€0.3 bn) showed the highest net outflows, bettered by alternative UCITS ETFs (-€0.1 bn).
The flows for December drove the overall net inflows into the European ETF segment to €37.7 bn for the year 2016.
Graph 2: Estimated Net Sales, December 2016 (Euro Millions)
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 164 different peer groups. The highest assets under management at the end of December were held by funds classified as Equity US (€82.1 bn), followed by Equity Eurozone (€43.0 bn), Equity Global (€36.2 bn), and Equity Europe (€29.9 bn) as well as Bond EUR Corporates (€27.1 bn). These five peer groups accounted for 42.42% of the overall assets under management in the European ETF segment, while the ten top classifications by assets under management accounted for 58.17%. Overall, 18 of the 164 peer groups each accounted for more than 1% of the assets under management. In total, these 18 peer groups accounted for €361.9 bn or 70.34% of the overall assets under management. These numbers showed that the assets under management in the European ETF industry continue to be highly concentrated.
Graph 3: Ten Top Lipper Global Classifications by Assets Under Management, December 31, 2016 (Euro Millions)
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 face the risk of being closed in the near future. They are obviously lacking investor interest and might therefore not be profitable for the respective fund promoters.
Graph 4: Ten Smallest Lipper Global Classifications by Assets Under Management, December 31, 2016 (Euro Millions)
Source: Thomson Reuters Lipper
Fund Flows by Lipper Global Classifications
With regard to the overall sales for December, it was not surprising that equity peer groups dominated the ten best selling Lipper classifications. The best selling Lipper global classification for December was Equity Europe (+€1.0 bn), followed by Equity US (+€0.9 bn) and Equity Eurozone (+€0.7 bn). The inflows of the ten best selling Lipper classifications equalled to 115.77% of the overall 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 Top Lipper Global Classifications by Estimated Net Sales, December 2016 (Euro Millions)
Source: Thomson Reuters Lipper
On the other side of the table the ten peer groups with the highest net outflows for December accounted for €2.6 bn of outflows. Equity Emerging Markets Global (-€0.5 bn) faced the highest net outflows, bettered somewhat by Bond Emerging Markets Global in Local Currencies (-€0.4 bn) and “unclassified” ETFs (-€0.3 bn).
Graph 6: Ten Worst Selling Lipper Global Classifications by Estimated Net Sales, December 2016 (Euro Millions)
Source: Thomson Reuters Lipper
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 47 ETF promoters in Europe held assets at or above €1.0 bn each. The largest ETF promoter in Europe—iShares (€250.6 bn)—accounted for 48.71% of the overall assets under management, far ahead of the number-two promoter—db x-trackers (€53.3 bn)—and the number-three promoter—Lyxor ETF (€51.0 bn).(To learn more about the concentration of the European ETF market on the promoter level, please read our report: Is the dominance of big players killing the competition in the European ETF industry?)
Graph 7: Ten Top ETF Promoters by Assets Under Management, December 31, 2016 (Euro Millions)
Source: Thomson Reuters Lipper
The ten top promoters accounted for 92.75% of the overall assets under management in the European ETF industry. This meant in turn that the other 37 fund promoters registering at least one ETF for sale in Europe accounted for only 7.25% of the overall assets under management.
Fund Flows by Promoters
Since the European ETF market is highly concentrated, it is not surprising that eight of the ten largest promoters by assets under management were also among the ten top-selling ETF promoters for December. iShares, with net sales of €3.2 bn, was the best selling ETF promoter in Europe, followed by Amundi ETF (+€1.6 bn) and SPDR (State Street) (+€0.4 bn).
Graph 8: Ten Best Selling ETF Promoters, December 2016 (Euro Millions)
Source: Thomson Reuters Lipper
Since the flows of the ten top promoters accounted for 128.83% of the overall estimated net flows into ETFs in Europe for December, it was clear that some of the 47 promoters (17) faced net outflows (-€1.5 bn in total) over the course of December.
Assets Under Management by Funds
There were 2,097 instruments (primary funds and convenience share classes) listed as ETFs in the Lipper database at the end of December. 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 111 of the 2,097 instruments held assets above €1.0 bn each. These products accounted for €295.7 bn or 57.47% of the overall assets in the European ETF industry. The ten largest ETFs in Europe accounted for €91.3 bn or 17.75% 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 9: Ten Largest ETFs by Assets Under Management, December 31, 2016 (Euro Millions)
Source: Thomson Reuters Lipper
ETF Flows by Funds
A total of 682 of the 2,097 instruments analyzed in this report showed net inflows of more than €10,000 each for December, accounting for €17.1 bn or 345.48% of the overall net flows. This meant in turn that the other 1,415 instruments faced no flows or net outflows for the month. In more detail only 33 of the 682 ETFs posting net inflows enjoyed inflows of more than €100 m each during December, summing to €7.4 bn. The best selling ETF for December, iShares Core S&P 500 UCITS ETF USD (Acc), accounted for net inflows of €0.6 bn or 12.56% of the overall net inflows; it was followed by iShares Ultrashort Bond UCITS ETF EUR (Dist) (+€0.5 bn) and iShares Core MSCI World UCITS ETF USD (Acc) (+€0.5 bn).
Graph 10: Ten Best Selling ETFs, December 2016 (Euro Millions)
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. Overall, nine of the ten best selling funds for December were promoted by iShares and accounted for total net inflows of €3.6 bn or 73.63% of the net inflows in the European ETF segment.
Detlef Glow is head of EMEA Research, Thomson Reuters Lipper
