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US equity and iShares dominate European ETF market

US equity exchanged traded funds (ETFs) were the preferred product for European investors looking at the ETF market in 2017, accounting for 15% of the market’s assets under management (AUM), according to Thompson Reuters Lipper research.

Lipper’s ‘European ETF Market Report: Review of the year 2017’ found assets under management (AUM) in ETFs hit an all-time high of €631.2bn by the end of last year. The sector with the highest AUM was US equity, which accounted for €97.3 bn, followed by eurozone equity at €54bn, global equity at €51.8bn, Europe equity €37.1bn, and emerging markets global equity at €31.7bn.

“The five top peer groups accounted for 43.09% of the overall assets under management in the European ETF segment, while the ten top classifications by assets under management accounted for 59.28%,” the report said.

The report noted that some sectors that were quite low in assets could face the risk of being closed in the near future as they lacked investor interest. These included Kuwait equity, bond EUR medium term, bond SGD (Singapore), and bond TRY (Turkey).

In terms of flows, the best selling sector was global equity (+€11.8bn), followed by US equity (+€10.7bn), and eurozone equity (+€8.3bn).

“The net inflows of the ten best selling Lipper classifications (€66.3 bn) equalled to 73.43% of the overall inflows for the year,” the report said.

It noted that this high concentration of fund flows was expected as investors often used ETFs to implement their market views and short-term asset allocation decisions.

“On the other side of the table the 10 peer groups with the highest net outflows for the year 2017 accounted for €5.7 bn of outflows. Bond EMU Government ( down €1.2bn) faced the highest net outflows for the year, bettered somewhat by Equity Germany (down €1.0 bn) and Bond Europe High Yield (down €0.8 bn),” the report said.

ETF promoters

ETF promoters in Europe were also highly concentrated with Blackrock’s iShares taking the top spot as the largest ETF promoter in Europe, accounting for 46.72% of the overall AUM. Deutsche Bank’s Xtrackers followed with €68.1bn, with Lyxor third at €64.2bn.

The top 10 promoters accounted for 93.91% of the overall AUM in the European ETF industry. Lipper noted that the dominance of the top ten promoters had further increased over the course of 2017 since 2016.

Of the ten largest ETF products by AUM in Europe, eight were iShares funds and with a Vanguard ETF coming in at second and a Lyxor fund at seventh.

Fund selectors

On the fund selector side, data from Expert Investor’s research team found that while index tracker funds remained a growth area, there were no changes in the use of trackers, rather a slow increase every quarter.

The data also found that across Europe, passives continued to attract assets, especially in equity. Among fund selectors, the attitude was also very consistently slightly positive.

 

 

 

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