Review of Europe’s January ETF market

The assets under management in the European exchange-traded fund (ETF) industry decreased from €449bn to €430.3bn during January.

This decrease of €18.7bn was driven mainly by the performance of the underlying markets (-€20.7 bn), while net sales contributed a positive €2bn 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 (€299.8bn) held the majority of the assets, followed by bond funds (€107.7bn), commodity products (€12.2bn), “other” funds (€6.2bn), money market funds (€3.5bn), alternative Ucits products (€0.5bn), and mixed-asset funds (€0.4bn).

Graph 1: Market share assets under management in the European ETF segment by asset type, January 31, 2016

16-02-29 Graph 1 Mkt Share by AUM

Source: Thomson Reuters Lipper

Fund flows by asset type

With regard to the overall market conditions during January, it was surprising that equity funds (+€1.1bn) enjoyed the highest net inflows for the month, followed by bond funds (+€0.6bn), “other” funds (+€0.4bn), and commodity products (+€0.01bn). In contrast, money market funds (-€0.1bn) suffered the highest net outflows, bettered somewhat by alternative UCITS funds (-€0.001bn) and mixed-asset products (-€0.0002bn).

The flows for January drove the overall net inflows in the European ETF segment to €2bn for the year so far.

Graph 2: Estimated net sales, January 2016 (Euro millions)

16-02-29 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 (€60.9bn), followed by Equity EuroZone (€45.3bn), Equity Europe (€27.7bn), and Equity Global (€24.8bn) as well as Bond EUR Corporates (€20.4bn). These five peer groups accounted for 41.63% of the overall assets under management in the European ETF segment, while the ten top classifications by assets under management accounted for 58.78%. 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 €314.4bn or 73.06% 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, January 31, 2016 (Euro millions)

16-02-29 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, January 31, 2016 (Euro millions)

16-02-29 Graph 4 Smallest LGC by AUM

Source: Thomson Reuters Lipper

Fund flows by Lipper global classifications

With regard to the overall sales for January, it was not surprising that the peer groups in the ten best selling Lipper classifications were spread mainly between bonds and equities. That said, the first three—Equity Eurozone (+€1.6bn), Equity UK (+€0.8bn), and Equity Global (+€0.5bn) —accounted for more than 100% (+148.09%) of the overall sales during January. 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, January 2016 (Euro millions)

16-02-29 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 counted for €3.3bn of outflows. With regard to the general market conditions, it was not surprising to see categories such as Equity Japan (-€818m), Bond EUR Corporates (-€595m), and Equity Emerging Markets Global (-€497m) facing net outflows.

Graph 6: Ten worst selling Lipper global classifications by estimated net sales, January 2016 (Euro millions)

16-02-29 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 €1bn. The largest ETF promoter in Europe—iShares (€205.5bn)—accounted for 47.76% of the overall assets under management, far ahead of the number-two promoter—db x-trackers (€54.4bn)—and the number-three promoter—Lyxor (€45.7bn).

Graph 7: Ten top ETF promoters by assets under management, January 31, 2016 (Euro millions)

16-02-29 Graph 7 Top Promoter AUM

The ten top promoters accounted for 92.80% 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 7.20% of the overall assets under management.

Fund flows by promoters

Since the European ETF market is highly concentrated, it is no surprise that six of the ten largest promoters by assets under management were also among the ten top-selling ETF promoters for January. iShares, with net sales of €0.8bn, maintained its position as the best selling ETF promoter in Europe, followed by db x-trackers (+€0.6bn) and the Dutch Think Capital (+€0.4bn).

Graph 8: Ten best selling ETF promoters, January 2016 (Euro millions)

16-02-29 Graph 8 Top 10 Promoter ENS

Source: Thomson Reuters Lipper

Since the flows of the ten top promoters accounted for 137.56% of the overall estimated net flows into ETFs in Europe for January, it is clear that some of the 49 promoters (11) faced net outflows (-€0.8bn in total) over the course of January.

Assets under management by funds

There were 2,136 instruments (primary funds and convenience share classes) listed as ETFs in the Lipper database at the end of January. 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 2,136 instruments held assets above €1bn. These products accounted for €237.4bn or 55.18% of the overall assets in the European ETF industry. The ten largest ETFs in Europe accounted for €78bn or 18.13% of the overall assets under management.

Graph 9: Ten largest ETFs by assets under management, January 31, 2016 (Euro millions)

16-02-29 Graph 9 Top 10 Funds by AUM

Source: Thomson Reuters Lipper

 

Detlef Glow is head of Lipper EMEA Research 

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