2019 wasn't just a record year for the stock market. Last year European ETFs have recorded inflows of over 100 billion euros (100,8 to be precise), a figure that brought total assets up to 234 billion from 152 in 2018 (+40%). It reveals the Money Monitor 2019 by Lyxor ETF Research which analyzes flows towards 47 active funds and ETFs, providing an overall view on theasset management industry.
The sharp increase in flows to ETFs, according to Lyxor experts, is mainly due to theacceleration of growth in Europe recorded in the last 5 years against a more mature US market (+20%, compared to 19% in the United States).
ETFs now hold 7% of total European fund assets (+1% compared to 2018) and are divided as follows: 69% equity ETFs, 27% bonds, 3% commodity ETFs (the remainder is distributed among the other asset classes).
In 2019 the flows were mainly directed towards the bond asset class, with inflows of 54 billion. “European investors have mostly sought higher yield opportunities (Corporate Bonds, US Government Bonds, Emerging Markets, High Yield) and geographic diversification played a key role, especially outside Europe. While on the one hand the growth of bond ETFs has taken years, on the other hand the trend observed in the last 5 years appears solid and resilient, with a average of 26 billion euros of annual inflowsi,” reads the report.
For the equity asset class the study, on the other hand, highlights greater contrasts mainly due to the economic uncertainty deriving from Brexit. However, the easing of trade tensions between the United States and China helped to lift investors' spirits, which in the second quarter of 2019 attracted flows of 46 billion euros on equity ETFs, while active equity funds experienced outflows of €43 billion. A prime example of this trend is UK equities, which showed strong flows into equity ETFs during the latter part of 2019, totaling €7,1bn. However, this did not happen for active funds.
Also pay attention to sustainable investments. According to the research, in fact, "the evolution of the regulatory context and the growing need for sustainable investment instruments by all categories of investors have fueled very substantial capital flows towards the ESG segment (environment, social and governance, ed.), which last year recorded a record figure of 16,5 billion euros of inflows, bringing total assets under management to €30,5 billion”. Smart Beta ETFs also did well, which they recorded in 2019 9,4 billion euros of inflows.
Vincent Denoiseux, Head of ETF Research and Solutions at Lyxor, comments: “The market share of ETFs has steadily increased over the past two decades, reflecting the growing use of these instruments by European investors. Through this renewed publication, which now includes flows to active funds, Lyxor intends to provide investors with an even more detailed picture of asset management industry trends and the trend of flows between active and passive management”.
