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Morningstar’s European ETP review finds inflows down in first quarter of 2024

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Morningstar has published a review of the European ETP market for the first quarter 2024, which finds that it gathered EUR44.5 billion of flows, down from EUR47.4 billion in the last quarter of 2023.

Jose Garcia-Zarate, Associate Director of Passive Strategies, Morningstar comments: “In the recent quarter, investment inflows found solace within equity ETFs, notably gravitating towards the US market. However, amidst this surge, value equity strategies and German equities were sidelined. Concurrently, the once steady stream into bond ETFs witnessed a slowdown, reflecting investor recalibration of rate cut expectations. Meanwhile, ESG appears to be going through a period of existential crisis as flows, while still positive in absolute terms, dwindle as a proportion of total flows, particularly within equity. It appears some investors forsake the long-term, fatigued by prolonged underperformance. Additionally, geopolitical uncertainties and the upcoming US election propel a tilt towards mainstream investments.”

Morningstar’s key findings for Q1 2024 include: 

The European ETP market gathered EUR44.5 billion of flows in the first quarter of 2024, down from EUR47.4 billion in the last quarter of 2023.

Assets under management grew to EUR1.81 trillion from EUR1.64 trillion at the end of 2023. This was a 10 per cent increase in the quarter – a new record-high for the market.

The bulk of flows in the first quarter went to equity ETFs, totalling EUR36.8 billion. Investors mostly favoured U.S. equity exposure, both individually and through global developed index propositions. Value equity strategies and German equity were out of favour.

Flows into bond ETFs totalled EUR8.8 billion, down from EUR14.1 billion in the fourth quarter of 2023. The slowdown was driven by investors´ recalibration of rate cut expectations.

Environmental, social, and governance ETFs gathered flows of EUR7.1 billion in the first quarter, down from EUR 13.8 billion in the fourth quarter of 2023 and accounted for 16 per cent of total flows, down from 29 per cent in the previous quarter. There was a substantial decline in flows into equity ESG ETFs in the first quarter as investors prioritised mainstream U.S. and global developed equity exposures.

Active ETFs gathered flows of EUR2.1 billion in the quarter and assets grew to EUR33.6 billion, representing 1.9 per cent of the total ETF market. The big news of the period was iShares´ debut in this space with the launch of two equity income products.

Commodity ETCs and ETFs saw EUR2.2 billion of outflows after EUR4.9 billion in the fourth quarter despite the increase in the price of gold, which remains the main exposure in this segment.

Strategic-beta ETFs saw EUR1.5 billion of outflows in the first quarter of 2024, led by disinvestment from value and risk-oriented strategies.

Thematic ETFs gathered EUR350 million of flows in the first quarter of 2024 after two consecutive quarters of outflows in the second half of 2023. Most of the money – EUR280 million – was directed to ETFs in the social themes group.

iShares topped the quarterly flows league with EUR14.1 billion, although this was down from EUR20.2 billion in the fourth quarter of 2023 due to the slowdown in bond ETF flows in the period. Xtrackers (DWS) took in EUR8 billion and saw its market share grow to 10.6 per cent from 10.4 per cent, while Amundi netted EUR5 billion and remains the second largest provider in Europe with a market share of 12.6 per cent, slightly down from 12.7 per cent at the end of 2023.

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