Monday Morning Memo: Review of the European ETF Market, August 2016

The promoters of exchange-traded funds (ETFs) enjoyed net inflows for August in a prospering market environment. Increasing markets lifted the assets under management in the European ETF industry from €473.5 bn for July to a new all-time high of €480.5 bn at the end of August. The increase of €7.0 bn for August was mainly driven by new sales (+€4.7 bn), while the performance of the underlying markets contributed €2.3 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 (€319.1 bn) held the majority of the assets, followed by bond funds (€134.2 bn), commodity products (€16.4 bn), “other” funds (€6.6 bn), money market funds (€3.3 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, August 30, 2016

16-09-26 Graph 1 - Market share AuM by Asset Type

Source: Thomson Reuters Lipper

Fund flows by asset type

As was the case for July, bond ETFs (+€2.9 bn) posted the highest net inflows for August, followed by equity ETFs (+€1.9 bn), and “other” ETFs (+€0.3 bn). At the other end of the table money market ETFs (-€0.2 bn) showed the highest net outflows, bettered somewhat by commodity ETFs (-€0.1 bn), alternatives ETFs (-€0.1 bn), and mixed-asset ETFs (-€0.01 bn).

The flows for August drove the overall net inflows into the European ETF segment to €259.0 bn for the year so far.

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

16-09-26 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 August were held by funds classified as Equity US (€71.9 bn), followed by Equity EuroZone (€38.5 bn), Equity Global (€30.8 bn), and Bond EUR Corporates (€26.9 bn) as well as Equity Europe (€26.3 bn). These five peer groups accounted for 40.46% 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, 20 of the 165 peer groups each accounted for more than 1% of the assets under management. In total, these 20 peer groups accounted for €345.2 bn or 71.85% 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, August 30, 2016 (€m)

16-09-26 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, August 30, 2016 (€m)

16-09-26 Graph 4 Smallest LGC by AUM

Source: Thomson Reuters Lipper

Fund flows by Lipper Global Classifications

With regard to the overall sales for August, it was not surprising that there were seven bond peer groups among the ten best selling Lipper classifications. It was somewhat surprising though to see that two equity peer groups were the best selling Lipper classifications within the ETF segment. The best selling Lipper global classification for August was Equity Emerging Markets Global (+€1.3 bn), followed by Equity US (+€0.8 bn) and Bond USD Corporates (+€0.5 bn). The inflows of the ten best selling Lipper classifications equalled to 53.98% 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 in the 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, August 2016 (€m)

16-09-26 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 August accounted for €2.3 bn of outflows. Equity Germany (-€0.9 bn) faced the highest net outflows, bettered somewhat by Equity Eurozone    (-€0.4 bn) and Bond USD High Yield (-€0.2 bn).

Graph 6: Ten worst selling Lipper Global Classifications by estimated net sales, August 2016 (€m)

16-09-26 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 (€235.0 bn)—accounted for 48.92% of the overall assets under management, far ahead of the number-two promoter—db x-trackers (€54.1 bn)—and the number-three promoter—Lyxor ETF (€47.1 bn).

Graph 7: Ten top ETF promoters by assets under management, August 30, 2016 (€m)

16-09-26 Graph 7 Top Promoter AUM

Source: Thomson Reuters Lipper

The ten top promoters accounted for 92.55% 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 7.45% 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 August. iShares, with net sales of €2.2 bn, maintained its position as the best selling ETF promoter in Europe, followed by UBS ETF (+€1.2 bn) and Amundi ETF (+€0.5 bn).

Graph 8: Ten best selling ETF promoters, August 2016 (€m)

16-09-26 Graph 8 Top 10 Promoter ENS

Source: Thomson Reuters Lipper

Since the flows of the ten top promoters accounted for 124.5% of the overall estimated net flows into ETFs in Europe for August, it was clear that some of the 49 promoters (12) faced net outflows (-€1.3 bn in total) over the course of August.

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 August. 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 109 of the 2,081 instruments held assets above €1.0 bn each. These products accounted for €277.9 bn or 57.84% of the overall assets in the European ETF industry. The ten largest ETFs in Europe accounted for €81.3 bn or 16.92% of the overall assets under management.

Graph 9: Ten largest ETFs by assets under management, August 30, 2016 (€m)

16-09-26 Graph 9 Top 10 Funds by AUM

Source: Thomson Reuters Lipper

ETF Flows by Funds
A total of 647 of the 2,081 instruments analyzed in this report showed net inflows of more than €10,000 each for August, accounting for €13.4 bn or 284.1% of the overall net flows. This meant in turn that the other 1,434 instruments faced no flows or net outflows for the month. In more detail only 25 of the 647 ETFs posting net inflows enjoyed inflows of more than €100 m each during August, summing to €5.8 bn. The best selling ETF for August, UBS ETF – MSCI EMU UCITS ETF (EUR) A-acc, accounted for net inflows of €0.6 bn or 13.23% of the overall net inflows; it was followed by UBS ETFs plc – MSCI Emerging Markets SF UCITS ETF USD A ac (+€0.5 bn) and iShares JP Morgan $ Emerging Markets Bond UCITS ETF (+€0.4 bn).

Graph 10: Ten best selling ETFs, August 2016 (€m)

16-09-26 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, five of the ten best selling funds for August were promoted by iShares and accounted for total net inflows of €1.6 bn.

 

Detlef Glow is head of EMEA Research, Thomson Reuters Lipper

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