October was another positive month for the European ETF industry as traders enjoyed inflows, while the market environment turned negative as the second wave of the COVID-19 hit Europe’s major markets and investors feared a second coronavirus blockade, causing an economic downturn. In total, net inflows into European ETFs was EUR 4.8 bn in October and EUR 50.5 bn so far this year, according to the latest data collected by Refinitiv.
The negative performance of the underlying markets led to a decline in AUM (from EUR 882.6 bn on September 30th to EUR 874.3 bn at the end of October) despite net inflows. This means that the EUR 8.3 bn decrease in October was driven by developments in the underlying markets (-EUR 13.1 bn), while net sales contributed EUR 4.8 bn to AUM. Not surprisingly, equity funds (EUR 563.8 bn) accounted for the majority of assets, followed by bond funds (EUR 262.4 bn), commodities (EUR 36.9 bn), alternative UCITS products (EUR 6.3 bn), money market funds (EUR 3.1 bn), mixed-asset funds (EUR 1.6 bn) and ‘other’ funds (EUR 0.2 bn).
Graph 1: Market Share, Assets Under Management in the European ETF Segment by Asset Type, October 31, 2020
ETF inflows by asset type
The European ETF industry recorded an estimated net inflow for October (+ EUR 4.8 bn) which was below the rolling 12-month average. Despite the inflows, the rolling 12-month average fell from EUR 7.5 bn in September to EUR 7 bn in October 2020.
ETF inflows were driven by equity ETFs (+EUR 2.3 bn), followed by bond ETFs (+EUR 2 bn), alternative UCITS ETFs (+EUR 0.3 bn), commodities ETFs (+EUR 0.3 bn), money ETFs (-EUR 0.1 bn) and ‘other’ ETFs (-EUR 0.01 bn). Meanwhile, mixed-asset ETFs (- EUR 0.1 bn) was the only asset class to face money outflows this month.
Graph 2: Estimated Net Sales by Asset Type, October 2020 (Euro Millions)
Xtrackers MSCI USA Information Tech UCITS ETF 1D, the best-selling European ETF
A total of 1,027 of the 2,940 instruments analyzed in this report showed net inflows of more than EUR 10,000 each for October, representing EUR 21,300 bn. This means that the other 1,926 instruments had no net flows or outflows during the month. When analyzing these statistics, it should be reminded that some of these instruments are convenience share classes that do not report AUM. This means that Lipper cannot calculate the fund flows for these ETFs.
On closer examination, only 47 of the 1,027 ETFs that recorded inflows enjoyed inflows of more than EUR 100 million during October, for a total of EUR 8.6 bn. The best-selling ETF in October, the Xtrackers MSCI USA Information Tech UCITS ETF 1D, recorded net inflows of EUR 0.6 bn. It was followed by iShares China CNY Bond UCITS ETF USD Dist (+EUR 0.5 bn) and iShares JP Morgan $ EM Bond UCITS ETF USD Dis (+EUR 0.4 bn).
Graph 3: Ten Best-Selling ETFs, October 2020 (Euro Millions)
The flow pattern at the fund level indicated that there was a lot of turnover during the month of October, but also showed the concentration of the European ETF industry even better than the statistics at the promotor or classification level. Given its size and the overall trend of net sales at the promotor level, it was not surprising that five of the top ten funds in October were promoted by iShares. These ETFs represented an estimated total net inflow of EUR 1.6 bn.