The promoters of ETFs enjoyed net inflows for October. The assets under management in the European ETF industry (€621.9 bn) increased for October, up from €600.9 bn at the end of September. The increase of €20.9 bn for October was mainly driven by the performance of the underlying markets (+€14.4 bn), while net sales contributed €6.6 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 (€441.4 bn) held the majority of the assets, followed by bond funds (€151.3 bn), commodity products (€18.0 bn), “other” funds (€6.7 bn), money market funds (€3.5 bn), mixed-asset funds (€0.6 bn), and alternative UCITS products (€0.4 bn).
Graph 1: Market Share, Assets Under Management in the European ETF Segment by Asset Type, October 31, 2017
Source: Thomson Reuters Lipper
Fund Flows by Asset Type
Equity ETFs (+€5.8 bn) posted the highest net inflows of the European ETF industry for October, followed by bond ETFs (+€1.0 bn), commodity ETFs (+€0.03 bn), and mixed-asset ETFs (+€0.003 bn), while alternative UCITS ETFs (-€0.001 bn), money market ETFs (-€0.06 bn), and “other” ETFs (-€0.2 bn) posted net outflows.
This flow pattern drove the overall net flows up to €74.9 bn for the year 2017 so far.
Graph 2: Estimated Net Sales, October 2017 (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 155 different peer groups. The highest assets under management at the end of October were held by funds classified as Equity US (€93.1 bn), followed by Equity Eurozone (€56.5 bn), Equity Global (€48.8 bn), and Equity Europe (€36.4 bn) as well as Equity Emerging Markets Global (€30.5 bn). These five peer groups accounted for 42.66% of the overall assets under management in the European ETF segment, while the ten top classifications by assets under management accounted for 58.67%. Overall, 20 of the 155 peer groups each accounted for more than 1% of the assets under management. In total, these 20 peer groups accounted for €452.0 bn or 72.68% 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 just as so-called satellites that are bought and sold quite frequently to implement asset allocation views in the investors’ 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, October 31, 2017 (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 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, October 31, 2017 (Euro Millions)
Source: Thomson Reuters Lipper
Fund Flows by Lipper Global Classifications
With regard to the overall sales for October, it was not surprising that the ten best selling peer groups were dominated by equity funds, since equity ETFs were once again investors’ darlings for the month. The best selling Lipper global classification for October was Equity Global (+€1.4 bn), followed by Equity Japan (+€1.2 bn) and Equity Eurozone (+€0.7 bn). It was noteworthy that Equity Sector Financials (+€0.4 bn) was the fifth best selling sector after appearing in the list of the three best selling Lipper classifications for two consecutive month.
The inflows of the ten best selling Lipper classifications equalled to 88.53% 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, October 2017 (Euro Millions)
Source: Thomson Reuters Lipper
On the other side of the table the ten peer groups with the highest net outflows for October accounted for €1.7 bn of outflows. Bond Emerging Markets Global in Local Currencies (-€0.3 bn) faced the highest net outflows, bettered somewhat by Equity Germany (-€0.3 bn) and Bond EUR (-€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 47 ETF promoters in Europe held assets at or above €1.0 bn each. The largest ETF promoter in Europe—iShares (€292.4 bn)—accounted for 47.02% of the overall assets under management, far ahead of the number-two promoter—Xtrackers (€65.2 bn)—and the number-three promoter—Lyxor ETF (€63.4 bn). It is noteworthy that Xtrackers reclaimed second place in this table in October because of higher net sales compared to Lyxor ETF. (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, October 31, 2017 (Euro Millions)
Source: Thomson Reuters Lipper
The ten top promoters accounted for 93.32% 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 6.68% of the overall assets under management.
Fund Flows by Promoters
Since the European ETF market is highly concentrated, it was not surprising that eight of the ten largest promoters by assets under management were among the ten top-selling ETF promoters for October. Europe’s largest ETF promoter—iShares—was still the best selling ETF promoter in Europe for October (+€2.3 bn), ahead of Xtrackers (+€1.6 bn) and Amundi ETF (+€0.6 bn).
Graph 7: Ten Best Selling ETF Promoters, October 2017 (Euro Millions)
Source: Thomson Reuters Lipper
Since the flows of the ten top promoters accounted for 97.72% of the overall estimated net flows into ETFs in Europe for October, it was clear that some of the 47 promoters (8) faced net outflows (-€0.2 bn in total) over the course of October.
Assets Under Management by Funds
There were 2,305 instruments (primary funds and convenience share classes) listed as ETFs in the Lipper database at the end of October. 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 140 of the 2,305 instruments held assets above €1.0 bn each. These products accounted for €374.1 bn or 60.16% of the overall assets in the European ETF industry. The ten largest ETFs in Europe accounted for €103.0 bn or 16.56% 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, October 31, 2017 (Euro Millions)
Source: Thomson Reuters Lipper
ETF Flows by Funds
A total of 745 of the 2,305 instruments analyzed in this report showed net inflows of more than €10,000 each for October, accounting for €13.3 bn or 201.03% of the overall net flows. This meant in turn that the other 1,560 instruments faced no flows or net outflows for the month. In more detail only 20 of the 745 ETFs posting net inflows enjoyed inflows of more than €100 m each during October, summing to €3.6 bn. The best selling ETF for October, db x-trackers MSCI World Index UCITS ETF 1C, accounted for net inflows of €0.5 bn or 7.39% of the overall net inflows; it was followed by db x-trackers MSCI Japan Ix UCITS ETF 2D (DR) USD Hgd (+€0.4 bn) and iShares Core Corp Bond UCITS ETF EUR (Dist) (+€0.4 bn).
Graph 9: Ten Best Selling ETFs, October 2017 (Euro Millions)
Source: Thomson Reuters Lipper
The flow pattern at the fund level indicated that there was a lot of turnover and rotation during October, but it also showed the concentration of the European ETF industry even better than the statistics at the promoter or classification level. Nevertheless, five of the ten best selling funds for October were promoted by iShares; these accounted for total net inflows of €1.2 bn or 17.83% of the net inflows into the European ETF segment.
Detlef Glow is head of Emea Research at Thomson Reuters Lipper
