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ETF European Awards 2023

2022: an extraordinary year for European ETFs


This report reflects the strength and celebrates the winners in the thirteenth year of the ETF Express European awards, a year that turned out to be an extraordinary year with double digit losses in both equities and bonds, a double whammy for investors everywhere.

However, as we know, the US saw ETFs enjoy their second best year of asset raising in 2022, and money continued to flow into European ETFs, despite the many structural problems that lie in the path of the European ETF industry and its growth among retail investors.

Following an 11 per cent fall in assets under management (AUM) last year, growth in the ETF market is expected to rebound over 2023, reaching USD1.7 trillion by year end, according to EY’s latest European ETF research and analysis.

This predicted growth is set to continue, and the firm says that the European ETF industry is expected to report an annual 12 per cent increase in value over the next five years, reaching in excess of USD3.1 trillion AUM by 2030.

The problems, chiefly the outdated commission system that is in place across much of Europe which makes it commercially challenging to promote ETFs, and the fragmented European market, are being addressed. Despite the CFA’s gloomy survey which found that only 34 per cent of European investment professionals think that inducement payments should be banned, the European Union is actively working on exactly such a ban, and the UK has already gone through its Retail Distribution Review process.

The fragmented market is also being addressed with 14 European exchange groups, present in twenty-six Member States of the EU (all EU Members States except Slovakia), announcing a joint initiative to participate in the future selection process for the provision of a consolidated tape (CT) for equities in the European Union.

These two initiatives are likely to fire up inflows into ETFs substantially, but we are already seeing steady growth, with assets standing at close to USD1.5 trillion in Europe, at the time of writing, in late March, 2023.

Interviewed for this report, Invesco’s Matthew Tagliani noted that right now is an ‘unusually interesting place’ where ESG will undoubtedly continue to dominate, but that there has been a fundamental reset of financial markets, which had remained much the same since the GFC in 2008, with a low interest rate environment. 2022 brought that market turbulence, and all the trends reversed in a year, giving ETF issuers a challenge but also the opportunity to rise to their strengths as creators of new and innovative product to suit new market conditions.

Most recent news, at the time of writing, is fear of systemic collapse in the banking sector. The problem started with SVB and regional bank collapses in the US, and has spread to Switzerland, traditionally the most stable home of the bank, with UBS rescuing Credit Suisse in a move that has not pleased the markets.

2023 might prove to be an even more extraordinary year than 2022, but ETPs will be there, whether it’s in gold (up 10 per cent in two weeks, at the time of writing, and well represented in ETPs) or maybe even a return to strength for bitcoin, also well represented in ETPs and such a strong feature of last year’s awards but barely recognised in this year’s and up 71 per cent year to date, again at the time of writing.

I don’t think I have ever written a piece, so hedged about with ‘at the time of writing’ caution, which just demonstrates how extraordinary this year is already proving to be. I look forward to being here again next year and examining how well ETFs have withstood all the challenges.

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