European ETF Market Concentrates

Shanny Basar

The dominance of the ten largest promoters of exchange-trade funds in Europe increased last year according to Thomson Reuters Lipper.

Detlef Glow, Lipper

Detlef Glow, head of Lipper EMEA research, said in his latest Monday morning memo, Review of the European ETF Market in 2017, that the top ten ETF promoters in Europe had 93.91% of the overall ETF assets under management in the region. Therefore, 37 fund promoters registering at least one ETF for sale in Europe accounted for the remaining 6.09% of assets.

“Comparing these numbers with numbers for 2016 showed that the dominance of the ten top ETF promoters in Europe further increased over the course of 2017,” added Glow.

The European ETF industry grew for a sixth consecutive year and had €631.2bn ($775bn) in assets at the end of 2017 according to the report. The ten top ETF promoters had 96.6% of the overall estimated net inflows in Europe last year. In contrast, 11 promoters had total net outflows of €0.3bn during 2017.

As a result of this concentration, only 145 of the 2,320 instruments listed as ETFs in the Lipper database at the end of last year held assets of more than €1bn each.

“These products accounted for €383.8bn or 60.8% of the overall assets in the European ETF industry,” added Glow. “The ten largest ETFs in Europe accounted for €104.4bn or 16.55% of the overall assets under management. “

BlackRock’s iShares was the largest ETF promoter in Europe last year with €294.9bn or nearly half, 46.7%, of the overall assets under management. Deutsche Bank’s was in second place with Xtrackers’ €68.1bn, followed by Societe General’s Lyxor ETF in third with €64.2bn.

ETFGI, the independent research and consultancy firm, reported last week that assets invested in ETFs and ETPs listed in Europe increased by 40.1% last year to reach a new high of $802.4bn in assets under management.

“Assets invested in European-listed ETFs/ETPs grew by a record $229.8bn during 2017, over double the previous record of $67bn set in 2016,” added ETFGI. “

Net inflows of $108.3bn last year were nearly double, 94.4% more, than the net inflows for 2016 and more than double the average for net inflows over the previous five years.

Hector McNeil, HanETF

Hector McNeil, co-chief executive and founder of HANetf, told Markets Media last month that the 15% market share for passive strategies in Europe could be more than 35% in five to 10 years. HANetf  is Europe’s first independent third-party provider of services for asset managers who want launch ETFs in the region, which has different tax regimes and languages in each national market.

McNeil said: “Crucially, if you look at the numbers now, in the US the majority of new money already goes into ETFs, and Europe is following suit. If this continues – and we think it will – mutual funds could well find themselves consigned to the ‘legacy’ bucket within 15 years.”

He continued that growth in Europe will come from smart beta products, where ETFs do not track standard market cap-weighted indexes, but instead use indexes weighted towards factors such as low volatility or dividend yield; ESG funds and thematic offerings e.g related to blockchain or self-driving cars. McNeil expects all active strategies, except illiquid assets such as real estate and private equity, to become available in an ETF structure.

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