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2023 a record-breaking year for ETFs: EFAMA


The European Fund and Asset Management Association (EFAMA) has published its 2024 industry Fact Book, which includes a foreword by EFAMA President, Sandro Pierri, in-depth analyses of trends in the European investment fund industry (for 2023 and over the longer term) and an extensive overview of regulatory developments across 29 European countries.

Key highlights on the long-term industry trends include:

•               Large funds are becoming increasingly important in the UCITS market – UCITS funds smaller than EUR100 million accounted for less than 4 per cent of the total net assets of UCITS in 2023, with a market share that is gradually falling. At the same time, the share of the funds with more than EUR1 billion in net assets is increasing.

•               The cost of long-term UCITS continued to fall – During the 2019-2023 period, the average cost of active long-term UCITS decreased from 1.16 per cent to 1.06 per cent, while the cost of passive long-term UCITS declined from 0.23 per cent to 0.21 per cent. This trend is expected to continue, driven by heightened transparency for fund fees and intensified competition between asset managers.

•               Passive UCITS continue to gain market share – The market share of passive UCITS rose from 11 per cent in 2013 to 26 per cent at end 2023. This trend can be attributed to a combination of lower costs for passive funds and increasing investor demand for ETFs.

•               Foreign investors are increasingly significant buyers of EU investment funds – Over the past five years, foreign investors bought EUR276 billion of EU investment funds on average annually. In comparison, EUR174 billion was sold cross-border within the EU and EUR196 billion was purchased domestically.

•               The share of US stocks in the asset allocation of equity UCITS has risen sharply – The share of US stocks doubled from 22 per cent to 44 per cent over the past decade. This is due to US stock markets outperforming those in Europe, particularly the large US technology stocks, EFAMA says.

Additional key findings for 2023:

•               ETFs had a record-breaking year – UCITS ETFs attracted EUR169 billion in net sales in 2023. Non-ETF long-term UCITS on the other hand, saw net outflows of EUR 155 billion throughout 2023.

•               Sales of sustainable funds slowed down – Net sales of SFDR Article 9, ‘dark green’, funds, declined compared to 2022. Conversely, Article 6 (no sustainability focus) funds saw a turnaround, attracting EUR 41 billion in net inflows. These trends were mainly driven by the rising popularity of ETFs, as most ETFs are Article 6, EFAMA says.

•               Average annual performance of all major UCITS types was positive – Equity UCITS delivered on average 14.2 per cent, multi-asset UCITS yielded 8.7 per cent, bond UCITS 5.7 per cent and money market funds 3.3 per cent. With the EU inflation rate at 3.4 per cent for the year, most UCITS proved to be an excellent investment choice in 2023.

•               EU retail investors continued to buy funds in 2023 but shifted their focus towards bonds – Given the reluctance among banks to raise interest rates on savings accounts, national governments in countries such as Italy and Belgium successfully attracted domestic retail savers by offering higher-yielding bond issuances.

EFAMA’s Director General, Tanguy van de Werve says: “This year’s Fact Book shows that UCITS are delivering good returns with costs declining, attracting both European and foreign investors. While this is good news for the financial wellbeing of those investors, there are still far too many European households not reaping the benefits of investing in capital markets. This is a pivotal year of change within the EU institutions, with clear recognition from policymakers that we need to encourage more retail investing to address the pension gap and support economic growth. To achieve that, we need decisive actions that simplify investing, cut red tape, and move us closer to a Savings and Investments Union.”

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