16 March 2020
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Despite rough market conditions, February was another positive month for the European ETF industry as the promoter of ETFs enjoyed inflows. The combination of below average inflows and a negative performance of the underlying markets led to a decrease in assets under management from €883.0 bn as of January 31, 2020, to €839.9 bn at the end of February. The decrease of €43.1 bn for February was driven by the performance of the underlying markets (-€46.3 bn), while the net inflows contributed €3.2 bn to the decrease in assets.
It was not surprising equity funds (€558.7 bn) held the majority of assets, followed by bond funds (€246.6 bn), commodity products (€23.3 bn), alternative Ucits products (€6.4 bn), money market funds (€3.1 bn), mixed-assets funds (€1.6 bn), and "other" funds (€0.2 bn).
Graph 1: Market Share, Assets Under Management in the European ETF Segment by Asset Type, February 29, 2020
Source: Refinitiv Lipper
Fund Flows by Asset Type
The European ETF industry enjoyed estimated net inflows for February (+€3.2 bn) which were below the rolling 12-month average. These flows brought that average down to €7.2 bn from €8.2 bn in January 2020. The inflows in ETFs were driven by bond funds (+€2.5 bn), followed by equity ETFs (+€0.4 bn), commodity ETFs (+€0.2 bn), alternative UCITS ETFs (+€0.1 bn), mixed-asset ETFs (+€0.1 bn), and "other" ETFs (+€0.05 bn). On the other side of the spectrum, money market ETFs (-€0.1 bn) were the only asset type with outflows from ETFs.
This flow pattern drove the estimated overall net flows to €3.2 bn for the month and €15.3 bn year to date.
Graph 2: Estimated Net Sales, February 2020 (€m)
Source: Refinitiv Lipper
Assets Under Management by Lipper Global Classifications
In order to examine Lipper global classifications in further detail, the European ETF market was split into 172 different peer groups. The highest assets under management at the end of February were held by funds classified as Equity U.S. (€157.8 bn), followed by Equity Global (€86.9 bn), Equity Eurozone (€47.8 bn), Equity Emerging Markets Global (€43.3 bn), and Equity Europe (€42.2 bn). These five peer groups accounted for 45.01% of the overall assets under management in the European ETF segment, while the 10-top classifications by assets under management accounted for 58.08%. Overall, 19 of the 172 peer groups each accounted for more than 1% of assets under management. In total, these 19 peer groups accounted for €598.8 bn, or 71.29%, of the overall assets under management. In addition, it was noteworthy that the rankings of the largest peer groups were quite stable, indicating European investors use the funds from these peer groups as core holdings and not just as so-called satellite holdings that are bought and sold frequently to implement asset allocation strategies in investor portfolios. That said, the only shift within the five-top peer groups were between Equity Emerging Markets Global and Equity Europe, as these two peer groups again changed their positions on the table. These numbers showed assets under management in the European ETF industry continued to be highly concentrated.
Graph 3: Ten-Top Lipper Global Classifications by Assets Under Management, February 29, 2020 (€m)
Source: Refinitiv 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 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 4: Ten Smallest Lipper Global Classifications by Assets Under Management, February 29, 2020 (€m)
Source: Refinitiv Lipper
Fund Flows by Lipper Global Classifications
The net inflows of the 10 best-selling Lipper classifications accounted for €7.1 bn. With regard to the overall sales for February, it was not surprising bond funds (+€3.8 bn) dominated the table of the 10 best-selling peer groups by net flows and the peer group count. Conversely, the best-selling Lipper global classification for February was Equity Global (+€1.5 bn), followed by Bond EMU Government (+€1.1 bn) and Equity US (+€1.1 bn).
These numbers showed the European ETF segment is also highly concentrated with regard 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 5: Ten Best- and Worst-Selling Lipper Global Classifications by Estimated Net Sales, February 2020 (€m)
Source: Refinitiv Lipper
On the other side of the table, the 10 peer groups with the highest net outflows for February accounted for €5.4 bn of outflows.
Assets Under Management by Promoters
A closer look at assets under management by promoter in the European ETF industry also showed high concentration, with only 22 of the 52 ETF promoters in Europe holding assets at or above €1.0 bn. The largest ETF promoter in Europe—iShares (€388.7 bn)—accounted for 46.28% of the overall assets under management, far ahead of the number-two promoter—Xtrackers (€89.2 bn)—and the number-three promoter—Lyxor ETF (€62.9 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 6: Ten-Top ETF Promoters by Assets Under Management, February 29, 2020 (€m)
Source: Refinitiv Lipper
The 10-top promoters accounted for 93.01% of the overall assets under management in the European ETF industry. This meant, in turn, the other 42 fund promoters registering at least one ETF for sale in Europe accounted for only 6.99% of the overall assets under management.
Fund Flows by Promoters
Since the European ETF market is highly concentrated, it was not surprising that six of the 10 largest promoters by assets under management were among the 10-top selling ETF promoters for February. Xtrackers was the best-selling ETF promoter in Europe for February (+€1.8 bn), ahead of Vanguard Group (+€0.9 bn) and UBS ETF (+€0.5 bn).
Graph 7: Ten Best-Selling ETF Promoters, February 2020 (€m)
Source: Refinitiv Lipper
The flows of the 10-top promoters accounted for estimated net inflows of €11.4 bn. Despite the overall flow trend in February, it was clear that some of the 50 promoters (eight) faced net outflows (-€0.06 bn in total) over the course of the month.
Assets Under Management by Funds
There were 2,925 instruments (primary funds and convenience share classes) listed as ETFs in the Lipper database at the end of February. Regarding the overall market pattern, it was not surprising the assets under management at the ETF level were also highly concentrated. Only 191 of the 2,925 instruments held assets above €1.0 bn each. These products accounted for €520.0 bn, or 61.92%, of the overall assets in the European ETF industry. The 10 largest ETFs in Europe accounted for €138.0 bn, or 16.43%, 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, February 29, 2020 (€m)
Source: Refinitiv Lipper
ETF Flows by Funds
A total of 1,077 of the 2,925 instruments analyzed in this report showed net inflows of more than €10,000 each for February, accounting for €26.9 bn. This meant the other 1,847 instruments faced no flows or net outflows for the month (When looking at this statistic, one needs to bear in mind that some of these instruments are convenience share classes that do not report assets under management. This means Lipper can't calculate fund flows for these ETFs). In more detail, only 63 of the 1,077 ETFs posting net inflows enjoyed inflows of more than €100 m during February—for a total of €13.1 bn. The best-selling ETF for February, UBS ETF MSCI Emerging Markets Ucits ETF (USD) Aa, accounted for net inflows of €0.9 bn. It was followed by iShares Core € Corp Bond Ucits ETF EUR Acc (+€0.8 bn) and Invesco S&P 500 ETF (+€0.5 bn).
Graph 9: Ten Best-Selling ETFs, February 2020 (€m)
Source: Refinitiv Lipper
The flow pattern at the fund level indicated there was a lot of turnover and rotation during February, but it also showed the concentration of the European ETF industry even better than the statistics at the promoter or classification level. Given its size, it was not surprising that five of the 10 best-selling funds for February were promoted by iShares. These five ETFs accounted for total estimated net inflows of €2.0 bn.
Detlef Glow is head of Lipper EMEA Research
