Review of the European ETF market during H1 2015

Detlef Glow, head of EMEA research at Thomson Reuters firm Lipper reviews the latest fund flow trends in the ETF industry.

The assets under management in the European ETF industry rose from €370.1 bn to €445.0 bn during the first six months of the year 2015. This increase of €74.9 bn was driven mainly by the performance of the underlying markets (+€38.3 bn), while net sales contributed €36.6 bn to the overall growth of the exchange-traded fund (ETF) segment.

With regard to the overall number of products, it was not surprising that equity funds (€323.2 bn) held the majority of the assets, followed by bond funds (€96.6 bn), commodity products (€14.5 bn), “other” funds (€7.0 bn), alternative UCITS (€0.5 bn), and mixed-asset products (€0.4 bn) as well as real estate funds (€0.02 bn).

Graph 1: Assets Under Management in the European ETF Segment by Asset Type, June 30, 2015 (Euro Millions)

15-09-07 Graph 1 - Asset Type AuM

Source: Lipper, a Thomson Reuters company

Fund Flows by Asset Type

With regard to the overall market conditions and the size of the peer group, it was not surprising that equity funds (+€20.3 bn) enjoyed the highest net inflows during the first six months of 2015, followed by bond funds (+€13.7 bn), “other” products (+€1.7 bn), commodity funds (+€0.5 bn), money market products (+€0.4 bn), and mixed-asset products (+€0.1 bn) as well as real estate funds (+€0.02 bn). Alternative UCITS products (-€0.1 bn) were the only category facing net outflows for the first half of 2015.

Graph 2: Estimated Net Sales, January 2015–June 2015 (Euro Millions)

15-09-07 Graph 2 - Asset Type Flows

Source: Lipper, a Thomson Reuters company

Assets Under Management by Lipper Global Classifications

With regard to the Lipper global classifications, the European ETF market was split into 158 different peer groups. The highest assets under management were held by funds classified as equity US (€58.7 bn), followed by equity EuroZone (€41.6 bn), equity Japan (€38.2 bn), and equity Global (€26.0 bn) as well as equity Europe (€25.4 bn). These five peer groups accounted for 42.68% of the overall assets under management in the European ETF segment, while the ten top classifications by assets under management accounted for 59.51%. Overall, 18 of the 158 peer groups accounted for more than 1% of the assets under management each. In summary these 18 peer groups accounted for 71.79% of the overall assets under management. This shows that the assets under management within the European ETF industry are highly concentrated.

Graph 3: Ten Top Lipper Global Classifications by Assets Under Management, June 30, 2015 (Euro Millions)

15-09-07 Graph 3 - LGC AuM

Source: Lipper, a Thomson Reuters company

Fund Flows by Lipper Global Classifications

With regard to the overall sales numbers for the first half of 2015, it was surprising that only four equity classifications were in the ten best selling Lipper classifications. That said, the first three—equity EuroZone (+€8.9 bn), equity Japan (+€6.0 bn), and equity Europe (+€4.1 bn)—accounted for 52.14% of the overall sales during the observation period. The assets under management showed that the flows within the ETF market were highly concentrated. That was to be expected, since investors often use ETFs to implement their market views and short-term asset allocation decisions, since these products are made for and therefore easy to use for these purposes.

Graph 4: Ten Top Lipper Global Classifications by Estimated Net Sales, January 2015–June 2015 (Euro Millions)

 15-09-07 Graph 4 - LGC Flows

Source: Lipper, a Thomson Reuters company

Assets Under Management by Promoters

A closer view of the assets under management in the European ETF industry by promoter also showed high concentration, since the largest promoter—iShares (€220.5 bn)—accounted for 49.5% 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 (€47.2 bn).

Graph 5: Ten Top ETF Promoters by Assets Under Management, June 30, 2015 (Euro Millions)

15-09-07 Graph 5 - Promoter AuM

Source: Lipper, a Thomson Reuters company

The ten top promoters accounted for 93.8% of the overall assets under management in the European ETF industry. This meant in turn that the other 35 fund promoters registering at least one ETF for sale in Europe accounted for only 6.2% of the overall assets under management.

Fund Flows by Promoters

Since the European ETF market is highly concentrated, it is no surprise that the three largest promoters by assets under management were also the three top-selling ETF promoters during the first half of 2015. While iShares, with net sales of €15.7 bn, maintained its position as the best selling ETF promoter in Europe, Lyxor (+€5.0 bn) and db x-trackers (+€4.7 bn) changed their positions.

Graph 6: Ten Best Selling ETF Promoters, January 2015–June 2015 (Euro Millions)

 15-09-07 Graph 6 - Promoter Flows

Source: Lipper, a Thomson Reuters company

Since the flows of the ten top promoters accounted for 100.27% of the overall estimated net flows into ETFs in Europe, it is clear that some of the 45 promoters (13) faced outflows (-€0.8 bn in total) over the course of the first six months of 2015.

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