Assets under management in ETFs (and ETPs) listed in Europe have surpassed $1 trillion as of the end of December 2019, according to data from ETF research firm ETFGI.
European-listed ETFs attracted net inflows of $125.3bn in 2019.
Total AUM rose 4.6% during the month, from $982.1 billion to $1.027trn, driven by a combination of strong net inflows and healthy market performance.
Europe’s ETF industry attracted bumper net inflows of $20.4bn during December, bringing total gatherings for the year to $125.3bn.
Fixed income ETFs attracted the lion’s share of flows in 2019 with $61.1bn (48.8%), followed by equity ETFs with $51.7bn (41.3%) and commodity ETFs with $8.7bn (6.9%).
Globally, fixed income ETFs eclipsed $1trn at the end of the year, primarily due to a similar surge in demand for bond ETFs in the US market. According to Matthew J. Bartolini, Head of SPDR Americas Research, State Street Global Advisors, this growth is being driven by four factors: cost, choice, client need, and comfort.
In terms of flows by provider, BlackRock’s iShares continued its dominance in Europe with net inflows of $59.8bn during the year, followed by UBS ETFs and Invesco with $15.9bn and $12.1bn respectively.
Bullish sentiment was also instrumental in European ETFs reaching the $1trn landmark. Upwards-trending markets in December saw the European ETF industry add $24.8bn in AUM. The S&P 500 finished the month up 2.9%, while international developed and emerging market equities, as measured by the MSCI EAFE and MSCI Emerging Markets, returned 3.7% and 7.4%, respectively.
At the end of December 2019, the European ETF/ETP industry consisted of 2,198 ETFs/ETPs with 8,401 listings from 70 providers on 27 exchanges.
Room for growth
Comparing the European ETF industry to its US counterpart, which is more than four times the size with circa $4.3trn in AUM, highlights the region’s potential for growth. The largest ETF in the US – the SPDR S&P 500 ETF (SPY US) – is roughly one-third of the size of the total European ETF market with $320bn AUM.
In contrast, Europe’s largest ETF is the $39.5bn iShares Core S&P 500 UCITS ETF.
Analysts are bullish about the outlook for the European ETF market. A May 2019 report from investment data and research firm Morningstar predicts that the European ETF industry could reach $2trn AUM by 2024, spurred by favourable regulatory changes, innovation, and an increasing acknowledgment of the long-term benefits of low-cost investing.
Hortense Bioy, Director, Passive Strategies and Sustainability Research, Morningstar, said, “The well-entrenched trend of investor preference for low-cost investment solutions continues to support our positive outlook for the European ETF industry.”
While fees in Europe have been driven lower over recent years, Morningstar notes that European ETFs remain relatively expensive when compared to the US market, indicating that further cuts can still play in stimulating growth.
Perhaps more importantly, however, increased competition in Europe is also leading to greater choice for investors as issuers seek to offer innovative products that are differentiated from the increasingly crowded mainstream exposures.
European domiciled ETFs offering exposure to credit volatility, Saudi Arabian and Kuwaiti equities, low carbon real estate, and ESG credit are all examples of recently launched ETFs targeting previously uncharted markets that have quickly gathered assets.
All this indicates a thriving industry in flux.