Review of the European ETF Market, February 2017

The promoters of exchange-traded funds (ETFs) enjoyed net inflows for February. These net inflows, in combination with positive market impacts, led to increased assets under management in the European ETF industry (€550.3bn) for February, up from €524.0bn at the end of January. The increase of €26.3bn for February was driven mainly by market performance (+€16.8bn), while net sales contributed €9.5bn to the increase of assets under management in the ETF segment. With regard to the overall number of products, it was not surprising that equity funds (€383.6bn) held the majority of the assets, followed by bond funds (€137.6bn), commodity products (€17.9bn), “other” funds (€7.1bn), money market funds (€3.3bn), mixed-asset funds (€0.5bn), and alternative UCITS products (€0.3bn).

Graph 1: Market Share, Assets Under Management in the European ETF Segment by Asset Type, February 28, 2017

Source: Thomson Reuters Lipper

Fund Flows by Asset Type
Equity ETFs (+€6.1bn) posted for February their fifth consecutive month of having the highest net inflows in the European ETF industry, followed by bond ETFs (+€2.5bn), ‘other’ ETFs (+€0.4bn), commodity ETFs (+€0.2bn), and money market ETFs (+€0.2bn) as well as mixed-asset ETFs (+€0.01bn) and alternative UCITS ETFs (+€0.004bn).

Graph 2: Estimated Net Sales, February 2017 (€m)

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 161 different peer groups. The highest assets under management at the end of February were held by funds classified as Equity US (€89.1bn), followed by Equity Eurozone (€43.4bn), Equity Global (€41.4bn), and Equity Europe (€31.7bn) as well as Bond EUR Corporates (€25.7bn). These five peer groups accounted for 42.04% of the overall assets under management in the European ETF segment, while the ten top classifications by assets under management accounted for 57.70%. Overall, 22 of the 161 peer groups each accounted for more than 1% of the assets under management. In total, these 22 peer groups accounted for €407.8bn or 74.11% 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, February 28, 2017 (Euro Millions)

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 28, 2017 (Euro Millions)

Source: Thomson Reuters Lipper

Fund Flows by Lipper Global Classifications
With regard to the overall sales for February, it was not surprising that equity peer groups took the lead among the ten best selling Lipper classifications. The best selling Lipper global classification for February was Equity Global (+€1.5bn), followed by Bond USD Inflation Linked (+€0.9bn) and Bond USD Corporates (+€0.9bn). The inflows of the ten best selling Lipper classifications equalled to 78.38% of the overall net 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, February 2017 (€m)

Source: Thomson Reuters Lipper

On the other side of the table the ten peer groups with the highest net outflows for February accounted for €2.1bn of outflows. Bond EUR Corporates (-€1.3bn) faced the highest net outflows, bettered by Bond EMU Government (-€0.2bn) and Bond EMU Government Short Term (-€0.1bn).

Graph 6: Ten Worst Selling Lipper Global Classifications by Estimated Net Sales, February 2017 (Euro Millions)

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 €1.0bn each. The largest ETF promoter in Europe—iShares (€264.0bn)—accounted for 47.98% of the overall assets under management, far ahead of the number-two promoter—Lyxor ETF (€55.5bn)—and the number-three promoter—db x-trackers (€55.2bn). It is notable that Lyxor ETF and db x-trackers changed positions in February. (To learn more about the concentration of the European ETF market at the promoter level, please read our report: Is the dominance of big players killing the competition in the European ETF industry?

Graph 7: Ten Top ETF Promoters by Assets Under Management, February 28, 2017 (€m)

Source: Thomson Reuters Lipper

The ten top promoters accounted for 92.62% 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 7.38% of the overall assets under management.

Fund Flows by Promoters
Since the European ETF market is highly concentrated, it is not surprising that nine 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 €3.2bn, was the best selling ETF promoter in Europe, followed by Lyxor ETF (+€2.4bn) and Amundi ETF (+€1.5bn).

Graph 8: Ten Best Selling ETF Promoters, February 2017 (€m)

Source: Thomson Reuters Lipper

Since the flows of the ten top promoters accounted for 99.79% of the overall estimated net flows into ETFs in Europe for February, it was clear that some of the 48 promoters (11) faced net outflows (-€0.5bn in total) over the course of February.

Assets Under Management by Funds
There were 2,122 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 109 of the 2,122 instruments held assets above €1.0 bn each. These products accounted for €294.8bn or 53.57% of the overall assets in the European ETF industry. The ten largest ETFs in Europe accounted for €91.8 bn or 16.68% 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, February 28, 2017 (€m)

Source: Thomson Reuters Lipper

ETF Flows by Funds
A total of 752 of the 2,130 instruments analyzed in this report showed net inflows of more than €10,000 each for February, accounting for €17.3bn or 182.11% of the overall net flows. This meant in turn that the other 1,378 instruments faced no flows or net outflows for the month. In more detail only 36 of the 752 ETFs posting net inflows enjoyed inflows of more than €100 m each during February, summing to €8.4bn. The best selling ETF for February, iShares Edge MSCI USA Value Factor UCITS ETF, accounted for net inflows of €0.6 bn or 6.32% of the overall net inflows; it was followed closely by iShares J.P. Morgan $ EM Bond UCITS ETF USD (Dist) (+€0.6bn) and Amundi ETF Euro Stoxx 50 UCITS ETF DR – EUR (C) (+€0.5bn).

Graph 10: Ten Best Selling ETFs, February 2017 (€m)

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, six of the ten best selling funds for February were promoted by iShares and accounted for total net inflows of €2.4bn or 25.26% of the net inflows in the European ETF segment.

ABOUT THE AUTHOR
Ridhima Sharma
Ridhima Sharma speaks German and is DACH Correspondent for InvestmentEurope. She has more than 8 years of experience in the media industry. Before joining us, she was working in India and covering automotive and lifestyle sectors. Over the years many of her stories have been published in various magazines across India.

Read more from Ridhima Sharma

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