Skip to content

Are European ETFs at their peak?

Detlef Glow
Detlef Glow
Head of Lipper EMEA Research, Refinitiv

After some record inflows for European ETFs, the funds industry is asking how long the boom can last. Detlef Glow, Head of EMEA Research at Lipper, analyzes the ETF trends and outlook.

  1. European ETFs saw net inflows of €22.8 billion in the first six months of 2018, which is strong in comparison with previous years.
  2. 2018 could become the year when European ETFs report their largest market share in history.
  3. M&A activity in the ETF segment is a sign of a maturing market, says Detlef Glow, Head of EMEA Research at Lipper.

The funds industry has become accustomed to new all-time highs and exceptional growth rates in European ETFs (exchange-traded funds).

So it is not surprising that some market observers are starting to ask whether the trend towards European ETFs is now over, since ETF flows have seemed to be lower over the first half of 2018.

In addition, we have witnessed a number of mergers and acquisitions in the ETF segment over the last 12 months and a slight increase in the number of fund liquidations.

However, I believe the activities with regard to M&A are clear signs of a maturing market and consequently rather normal.

European ETF net flows (euro bn), 2003-June 30, 2018. Are European ETFs at their peak?

Funds industry trends

European ETFs enjoyed net inflows of €22.8 billion over the course of the first six months of 2018, which was in fact a strong number in comparison to previous years.

The only exception was the year 2017, when the European ETF industry witnessed record net inflows. Although every year cannot be a record year, 2018 might still be a record one.

To analyze fund flows in a single market segment, one has to take the overall market into account, since it may have a general impact on trends in the underlying segments.

In this regard, it is important to take a closer look at the overall fund flows in Europe to assess the success of a given product type.

European net fund flows by product type (euro bn), 2004-June 30, 2018. Are European ETFs at their peak?

Market share record

A look at general fund flow trends in Europe shows that the flows into mutual funds in Europe are rather low.

Therefore, it should not come as a surprise to see ETF flows also lower now than in the past, since the overall trend shows weaker demand for funds by European investors in general.

Nevertheless, ETFs hold a large share of these flows.

In fact, 2018 could become the year when ETFs have their largest market share in history during a year of overall net inflows.

This means there could be another record ahead for ETFs in terms of relative market share, even though the absolute level of inflows into ETFs might not be at a record level.Market share of fund flows by product type, 2004-June 30, 2018. Are European ETFs at their peak?

European ETFs trends continue

It can be concluded that the trend toward ETFs in Europe continues and might be even stronger than before.

We are witnessing a higher market share for ETFs compared to mutual funds in this year of overall net inflows into those funds.

Find out more about Lipper, the global leader in independent fund performance data

  • The views expressed are those of the author, not necessarily our company.