ETF assets recovered throughout May

After a rough start for the year 2016 the assets under management in the European exchange-traded fund (ETF) industry recovered during April (+€8.1 bn) and May (+€9.0 bn) to €454.6 bn The increase of €9.0 bn for May was mainly driven by the performance of the underlying markets (+€8.7 bn), while net sales contributed only €0.3 bn to the overall growth in assets under management in the ETF segment. With regard to the overall number of products, it was not surprising that equity funds (€306.6 bn) held the majority of the assets, followed by bond funds (€122.6 bn), commodity products (€14.5 bn), “other” funds (€6.7 bn), money market funds (€3.4 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, May 31, 2016

16-06-27 Graph 2 - Market share AuM by Asset Type

Source: Thomson Reuters Lipper

Fund Flows by Asset Type
Taking the flows in the overall European fund industry during May into account, it was not surprising that ETFs showed low numbers of net fund flows. As in the overall fund market, bond ETFs (+€2.1 bn) enjoyed the highest net inflows for the month. They were followed by commodity products (+€0.4 bn) and “other” funds (+€0.2 bn) as well as money market products (+€0.2 bn) and mixed-asset funds (+€.007 bn). On the other side of the table equity ETFs again faced the highest net outflows (-€2.5 bn), bettered by alternative UCITS products (-€0.04 bn). The flows for May drove the overall net inflows in the European ETF segment to €9.8 bn for the year so far.

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

16-06-27 Graph 3 - 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 163 different peer groups. The highest assets under management were held by funds classified as Equity US (€66.0 bn), followed by Equity EuroZone (€40.6 bn), Equity Europe (€27.6 bn), and Equity Global (€27.1 bn) as well as Equity Germany (€17.9 bn). These five peer groups accounted for 40.91% of the overall assets under management in the European ETF segment, while the ten top classifications by assets under management accounted for 57.32%. Overall, 19 of the 163 peer groups each accounted for more than 1% of the assets under management. In total, these 19 peer groups accounted for €322.8 bn or 71.00% of the overall assets under management. These numbers showed 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, May 31, 2016 (Euro Millions)

16-06-27 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, May 31, 2016 (Euro Millions)

16-06-27 Graph 4 Smallest LGC by AUM

Source: Thomson Reuters Lipper

Fund Flows by Lipper Global Classifications
With regard to the overall sales for May, it was not surprising that there were six bond peer groups in the ten best selling Lipper classifications. Because of the low overall sales numbers, none of the best selling classifications accounted for estimated net sales of €1.0 bn or more. The best selling Lipper global classification for May was Bond EUR Corporates (+€0.8 bn), followed by Equity Emerging Markets Global (+€0.6 bn) and Bond USD Corporates (+€0.3 bn). 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, May 2016 (Euro Millions)

16-06-27 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 May accounted for €3.5 bn of outflows. Equity Eurozone (-€1.1 bn) faced once again the highest net outflows, again bettered by Equity Japan (-€0.8 bn) and Equity Germany (-€0.3 bn). A view of the general flow trends in Europe during May showed that the flows within the ETF segment were more or less in line with the overall fund flows, since European investors favoured bond funds in May, while they sold equities and other risky products.

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

16-06-27 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 at or above €1.0 bn each. The largest ETF promoter in Europe—iShares (€220.1 bn)—accounted for 48.42% of the overall assets under management, far ahead of the number-two promoter—db x-trackers (€54.6 bn)—and the number-three promoter—Lyxor ETF (€46.4 bn).

Graph 7: Ten Top ETF Promoters by Assets Under Management, May 31, 2016 (Euro Millions)

16-06-27 Graph 7 Top Promoter AUM

Source: Thomson Reuters Lipper

The ten top promoters accounted for 92.85% 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 7.15% of the overall assets under management.

Fund Flows by Promoters
Since the European ETF market is highly concentrated, it is somewhat surprising that only five of the ten largest promoters by assets under management were also among the ten top-selling ETF promoters for May. iShares, with net sales of €1.0 bn, maintained its position as the best selling ETF promoter in Europe, followed by db x-trackers (+€0.2 bn) and ThinkCapital (+€0.2 bn).

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

16-06-27 Graph 8 Top 10 Promoter ENS
Source: Thomson Reuters Lipper

Since the flows of the ten top promoters accounted for 512.1% of the overall estimated net flows into ETFs in Europe for May, it was clear that some of the 49 promoters (17) faced net outflows (-€1.3 bn in total) over the course of May.

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 May. 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 96 of the 2,118 instruments held assets above €1.0 bn each. These products accounted for €251.7 bn or 55.4% of the overall assets in the European ETF industry. The ten largest ETFs in Europe accounted for €77.8 bn or 17.1% of the overall assets under management.
Graph 9: Ten Largest ETFs by Assets Under Management, May 31, 2016 (Euro Millions)

16-06-27 Graph 9 Top 10 Funds by AUM

Source: Thomson Reuters Lipper

ETF Flows by Funds
A total of 592 of the 2,118 instruments analyzed in this report showed net inflows of more than €10,000 each for May, accounting for €9.5 bn or roughly 31 times the overall net flows. This meant in turn that the other 1,526 instruments faced no flows or net outflows for the month. In more detail 20 of the 592 ETFs posting net inflows enjoyed inflows of more than €100 m each during May, summing to €3.5 bn. The best selling ETF for May, UBS ETFs plc – MSCI Emerging Markets SF UCITS ETF USD A ac, accounted for net inflows of €0.4 bn or 130.5% of the overall net inflows; it was followed by iShares Euro Corporate Bond Large Cap UCITS ETF (+€0.3 bn) and iShares Core Euro Corporate Bond UCITS ETF (+€0.3 bn).

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

16-06-27 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, eight of the ten best selling funds for May were promoted by iShares and accounted for total net inflows of €1.7 bn.

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

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