The European ETF industry enjoyed record inflows of €256.4bn over the course of 2024. These inflows were way above the inflows of the former record year 2021, when ETFs enjoyed estimated year-to-date net flows of €161.4bn.
Equities €198.5bn were the best-selling asset type for the year. The inflows into equity ETFs must be seen in comparison to the €62.2bn outflows from actively managed mutual funds. This means that European investors seem to prefer ETFs over mutual funds when it comes to equity investments.
Bonds were the best-selling asset type in the European fund industry with €295.9bn inflows. As such, the comparably low inflows of €37.7bn into bond ETFs were somewhat surprising. This flow pattern means that European investors seem to prefer actively managed mutual funds over ETFs in the bond segment.
One reason for this might be a lack of available strategies since investors may be looking for more active or unconstrained products instead of plain vanilla index products in this space. This might be a subject of change, as we might see a lot of promoter activity regarding the launch active bond ETFs in the near future.
That said, investors often need a longer track record for their fund selection process. This, in effect, would mean that active bond ETFs will not see a lot of investor interest until they have a more robust track record.
In addition to this, the strong inflows into money market ETFs for the year 2024 were somewhat a surprise, since money market products normally do not play an important role in the European ETF industry.
However, the flows into money market products over the course of 2024 seem to be driven by the inverted yield curves as investors may want to harvest higher interest rates with lower duration risk as in the bond segment.
A view of the best-selling Lipper classifications shows no surprises as ETFs classified as Equity US enjoyed the highest estimated net flows of €85.2bn for 2024.
This classification was followed by Equity Global €64.5bn, Money Market EUR at €11.5 bn, Money Market USD at €10.6bn and Equity US Small & Mid Cap at €9.6bn.
The inflows into Equity US Small & Mid Cap might be a sign that European investors started to diversify their portfolios over the course of the year 2024, as the market share of the leading stocks in the US equity markets increased further over the course of the year.
With regard to the structure of the bond segment with its multiple layers of performance drivers – base currency, credit rating, issuer – it was no surprise to see only bond classifications such as Bond Global USD and Bond EMU Government on the list of the 10 best-selling Lipper classifications, with €6bn and €4.8bn inflows, respectively.
A view of the other side of the league table shows that there are classifications with estimated net outflows even in a record year. Nevertheless, as the altitude of these outflows is very low, these flows cannot be used to determine any trends.
Bond Emerging Markets Global in Local Currencies was the Lipper classification with the highest outflows for the year 2024, bleeding €2.4bn. It was bettered by Bond USD Government at -€1.9bn and Equity Theme – Alternative Energy at -€1.2bn.
If one would need to make an assumption about the Lipper classifications which faced outflows, it would be fair to say that European investors have in general reduced some of their exposure to more exotic or niche markets.
Detlef Glow is head of Lipper EMEA research at Refinitiv.
This article is for information purposes only and does not constitute any investment advice.
The views expressed are the views of the author, not necessarily those of LSEG Lipper or LSEG.
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