European ETFs decrease by €430bn in February

Assets under management in the European exchange-traded fund (ETF) industry decreased from €430.3 bn to €426.1 bn during February. This decrease of €4.2 bn was driven by the performance of the underlying markets (-€4.5 bn), while net sales contributed a positive €0.3 bn to the overall assets under management in the ETF segment.

  • Bond funds (+€1.9 bn) enjoyed the highest net inflows for February.
  • Equity Global (+€0.5 bn), Equity UK (+€0.5 bn), and Bond USD Corporates (+€0.3 bn) were the best selling Lipper global classifications for February.
  • iShares (+€0.5 bn), Deka ETF (+€0.3 bn), and Handelsbanken (+€0.2 bn) were the best selling ETF promoters in Europe for February.
  • The ten best selling funds gathered net inflows of €2.1 bn for February.
  • iShares Core MSCI World UCITS ETF (+€454 m) was the best selling individual ETF for February.

After a decrease during January, the assets under management in the European exchange-traded fund (ETF) industry decreased further—from €430.3 bn to €426.1 bn—during February. This decrease of €4.2 bn was driven by the performance of the underlying markets (-€4.5 bn), while net sales contributed a positive €0.3 bn to the overall assets under management in the ETF segment. With regard to the overall number of products, it was not surprising that equity funds (€292.3 bn) held the majority of the assets, followed by bond funds (€109.8 bn), commodity products (€13.4 bn), “other” funds (€6.3 bn), money market funds (€3.5 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, February 29, 2016

16-03-28 Graph 1 Mkt Share by AUM

Source: Thomson Reuters Lipper

Fund Flows by Asset Type
With regard to the overall market conditions during February, it was not surprising that equity funds (-€2.1 bn) faced net outflows for the month, bettered somewhat by mixed-asset funds (-€0.004 bn) and alternative products (-€0.0008 bn). Given the general flow pattern in the European fund industry, it was surprising that bond funds (+€1.9 bn) led the table, followed by commodity products (+€0.3 bn) and “other” funds (+€0.3 bn).
The flows for February drove the overall net inflows in the European ETF segment to €2.3 bn for the year so far.

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

16-03-28 Graph 2 ENS 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 164 different peer groups. The highest assets under management were held by funds classified as Equity US (€59.5 bn), followed by Equity EuroZone (€43.0 bn), Equity Europe (€27.3 bn), and Equity Global (€25.1 bn) as well as Bond EUR Corporates (€20.2 bn). These five peer groups accounted for 41.12% of the overall assets under management in the European ETF segment, while the ten top classifications by assets under management accounted for 57.93%. Overall, 20 of the 164 peer groups each accounted for more than 1% of the assets under management. In total, these 20 peer groups accounted for €314.3 bn or 73.76% of the overall assets under management. These numbers showed that the assets under management in the European ETF industry are highly concentrated.

Graph 3: Ten Top Lipper Global Classifications by Assets Under Management, February 29, 2016 (Euro Millions)

16-03-28 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, February 29, 2016 (Euro Millions)

16-03-21 Graph 4- Market Flows

Source: Thomson Reuters Lipper

Fund Flows by Lipper Global Classifications
With regard to the overall sales for February, it was surprising that there were only four equity peer groups in the ten best selling Lipper classifications. The first three—Equity Global (+€0.5 bn), Equity UK (+€0.5 bn), and Bond USD Corporates (+€0.3 bn)—each accounted for more than 100% of the overall sales during February. 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 in the European ETF segment 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, February 2016 (Euro Millions)

16-03-28 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 accounted for €3.4 bn of outflows. With regard to the general market conditions, it was not surprising to see categories such as Equity Eurozone (-€897 m), Equity US (-€676 m), and Equity Germany (-€552 m) facing net outflows.

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

16-03-28 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 49 ETF promoters in Europe held assets above €1.0 bn. The largest ETF promoter in Europe—iShares (€203.6 bn)—accounted for 47.78% of the overall assets under management, far ahead of the number-two promoter—db x-trackers (€53.0 bn)—and the number-three promoter—Lyxor (€44.8 bn).

Graph 7: Ten Top ETF Promoters by Assets Under Management, February 29, 2016 (Euro Millions)

16-03-28 Graph 7 Top Promoter AUM

Source: Thomson Reuters Lipper

The ten top promoters accounted for 92.32% of the overall assets under management in the European ETF industry. This meant in turn that the other 39 fund promoters registering at least one ETF for sale in Europe accounted for only 7.68% of the overall assets under management.

Fund Flows by Promoters
Since the European ETF market is highly concentrated, it is no surprise that five of the ten largest promoters by assets under management were also among the ten top-selling ETF promoters for February. iShares, with net sales of €0.5 bn, maintained its position as the best selling ETF promoter in Europe, followed by Deka ETF (+€0.3 bn) and Handelsbanken (+€0.2 bn).

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

16-03-28 Graph 8 Top 10 Promoter ENS

Source: Thomson Reuters Lipper

Since the flows of the ten top promoters accounted for 572.5% of the overall estimated net flows into ETFs in Europe for February, it is clear that some of the 49 promoters (16) faced net outflows (-€1.5 bn in total) over the course of February.

Assets Under Management by Funds
There were 2,118 instruments (primary funds and convenience share classes) listed as ETFs in the Lipper database at the end of February. 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 93 of the 2,118 instruments held assets above €1.0 bn. These products accounted for €233.5 bn or 54.8% of the overall assets in the European ETF industry. The ten largest ETFs in Europe accounted for €75.4 bn or 17.7% of the overall assets under management.

Graph 9: Ten Largest ETFs by Assets Under Management, February 29, 2016 (Euro Millions)

16-03-28 Graph 9 Top 10 Funds by AUM

Source: Thomson Reuters Lipper

ETF Flows by Funds
A total of 593 of the 2,118 instruments analyzed in this report showed net inflows for February, accounting for €11.1 bn or roughly seven times the overall net flows. This meant in turn that the other 1,525 instruments faced no flows or net outflows for the month. In more detail 19 of the 593 ETFs posting net inflows enjoyed inflows of more than €100 m each during February, summing to €3.2 bn. The best selling ETF for February, iShares Core MSCI World UCITS ETF, accounted for net inflows of €454 m or 152.9% of the overall inflows; it was followed by iShares S&P 500 Minimum Volatility UCITS ETF (+€343 m) and iShares $ High Yield Corporate Bond UCITS ETF (+€233 m).

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

16-03-28 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 February were promoted by iShares and accounted for total net inflows of €1.6 bn.

Detlef Glow, Thomson Reuters Lipper’s head of EMEA research

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