ETFs enjoy net inflows in September

The promoters of exchange-traded funds (ETFs) enjoyed net inflows for September in a sluggish market environment. Negative market impacts led—in spite of net inflows—to lower assets under management in the European ETF industry (€480.1 bn for September, down from €480.4 bn at the end of August). The decrease of €0.3 bn for September was mainly driven by negative market impacts (-€2.4 bn), while net sales contributed a positive €2.1 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 (€318.2 bn) held the majority of the assets, followed by bond funds (€134.7 bn), commodity products (€16.7 bn), “other” funds (€6.6 bn), money market funds (€3.0 bn), alternative UCITS products (€0.5 bn), and mixed-asset funds (€0.4 bn).

Graph 1: Market Share, Assets Under Management in the European ETF Segment by Asset Type, September 30, 2016

16-10-17 Graph 1 - Market share AuM by Asset Type

Source: Thomson Reuters Lipper

Fund Flows by Asset Type

Bond ETFs (+€1.3 bn) posted the highest net inflows for September, followed by equity ETFs (+€1.0 bn) and commodity ETFs (+€0.1 bn) as well as “other” ETFs (+€0.1 bn). At the other end of the table money market ETFs (-€0.3 bn) showed the highest net outflows, bettered somewhat by alternative UCITS ETFs (-€0.02 bn), and mixed-asset ETFs (-€0.01 bn).

The flows for September drove the overall net inflows into the European ETF segment to €28.1 bn for the year so far.

Graph 2: Estimated Net Sales, September 2016 (Euro Millions)

16-10-17 Graph 2 - Flows by Asset Type

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 165 different peer groups. The highest assets under management at the end of September were held by funds classified as Equity US (€71.6 bn), followed by Equity EuroZone (€38.0 bn), Equity Global (€31.2 bn), and Bond EUR Corporates (€27.1 bn) as well as Equity Europe (€26.4 bn). These five peer groups accounted for 40.44% of the overall assets under management in the European ETF segment, while the ten top classifications by assets under management accounted for 58.9%. Overall, 19 of the 165 peer groups each accounted for more than 1% of the assets under management. In total, these 19 peer groups accounted for €340.5 bn or 710.00% 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, September 30, 2016 (Euro Millions)

16-10-17 Graph 3 Top LGC by AUM

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, September 30, 2016 (Euro Millions)

16-10-17 Graph 4 Smallest LGC by AUM

Source: Thomson Reuters Lipper

Fund Flows by Lipper Global Classifications

With regard to the overall sales for September, it was not surprising that bond and equity peer groups dominated the ten best selling Lipper classifications. The best selling Lipper global classification for September was Bond Emerging Markets Global in Local Currencies (+€0.8 bn), followed by Equity Emerging Markets Global (+€0.5 bn) and Equity Global (+€0.5 bn). The inflows of the ten best selling Lipper classifications equalled to 168.03% 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, September 2016 (Euro Millions)

 16-10-17 Graph 5 Top Selling LGCs

Source: Thomson Reuters Lipper

On the other side of the table the ten peer groups with the highest net outflows for September accounted for €2.0 bn of outflows. Bond USD Short Term (-€0.3 bn) faced the highest net outflows, bettered somewhat by Equity Japan (-€0.3 bn) and Bond EMU Government (-€0.3 bn).

Graph 6: Ten Worst Selling Lipper Global Classifications by Estimated Net Sales, September 2016 (Euro Millions)

 16-10-17 Graph 6 LGC Outflows

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 48 ETF promoters in Europe held assets at or above €1.0 bn each. The largest ETF promoter in Europe—iShares (€234.5 bn)—accounted for 48.84% of the overall assets under management, far ahead of the number-two promoter—db x-trackers (€53.6 bn)—and the number-three promoter—Lyxor ETF (€46.6 bn).

Graph 7: Ten Top ETF Promoters by Assets Under Management, September 30, 2016 (Euro Millions)

16-10-17 Graph 7 Top Promoter AUM

Source: Thomson Reuters Lipper

The ten top promoters accounted for 92.52% 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 7.48% 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 September. iShares, with net sales of €1.0 bn, maintained its position as the best selling ETF promoter in Europe, followed by Vanguard (+€0.8 bn) and UBS ETF (+€0.4 bn).

Graph 8: Ten Best Selling ETF Promoters, September 2016 (Euro Millions)

 16-10-17 Graph 8 Top 10 Promoter ENS

Source: Thomson Reuters Lipper

Since the flows of the ten top promoters accounted for 155.10% of the overall estimated net flows into ETFs in Europe for September, it was clear that some of the 48 promoters (16) faced net outflows (-€1.3 bn in total) over the course of September.

Assets Under Management by Funds

There were 2,081 instruments (primary funds and convenience share classes) listed as ETFs in the Lipper database at the end of September. 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 108 of the 2,081 instruments held assets above €1.0 bn each. These products accounted for €276.9 bn or 57.67% of the overall assets in the European ETF industry. The ten largest ETFs in Europe accounted for €81.5 bn or 16.97% 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, September30, 2016 (Euro Millions)

 16-10-17 Graph 9 Top 10 Funds by AUM

Source: Thomson Reuters Lipper

ETF Flows by Funds

A total of 596 of the 2,081 instruments analyzed in this report showed net inflows of more than €10,000 each for September, accounting for €11.5 bn or 540.10% of the overall net flows. This meant in turn that the other 1,485 instruments faced no flows or net outflows for the month. In more detail only 28 of the 596 ETFs posting net inflows enjoyed inflows of more than €100 m each during September, summing to €5.4 bn. The best selling ETF for September, Vanguard S&P 500 UCITS ETF USD, accounted for net inflows of €0.7 bn or 34.21% of the overall net inflows; it was followed by iShares Emerging Markets Local Government Bond UCITS ETF (+€0.7 bn) and iShares Core S&P 500 UCITS ETF (+€0.4 bn).

Graph 10: Ten Best Selling ETFs, September 2016 (Euro Millions)

 16-10-17 Graph 10 Top Ten Funds by ENS

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, seven of the ten best selling funds for September were promoted by iShares and accounted for total net inflows of €1.9 bn.

Detlef Glow is head of EMEA research at Thomson Reuters Lipper

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