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European ETF Market Hits Record High in Q1 2024 Despite Shifts in Investor Preferences

In the first quarter of 2024, the European Exchange-Traded Funds (ETFs) market showcased resilience, reaching a record high in assets under management (AUM) despite slight fluctuations in investor preferences. According to data released by Morningstar, inflows into the ETF and exchange-traded commodity (ETC) market totaled €44.5 billion, marking a marginal decline from the previous quarter's €47.4 billion. However, the overall assets under management surged to an unprecedented €1.81 trillion, reflecting a noteworthy 10% increase.

European ETF Market Hits Record High in Q1 2024 Despite Shifts in Investor Preferences

Equity ETFs emerged as the primary attraction for investors, drawing in €36.8 billion. Notably, investors displayed a strong inclination towards US equity exposure, both through standalone options and global developed index offerings. Conversely, value equity strategies and German equities saw less enthusiasm from investors during this period.


Bond ETFs witnessed a slowdown, with inflows declining to €8.8 billion from €14.1 billion in the previous quarter. Morningstar attributed this decline to investors recalibrating their expectations regarding rate cuts. Similarly, Environmental, Social, and Governance (ESG) ETFs experienced a sharp drop in inflows, falling to €7.1 billion from €13.8 billion. This segment constituted 16% of total flows, down from 29% in the previous quarter, as investors prioritized mainstream US and global developed equity exposures.


Active ETFs saw gains of €2.1 billion, with iShares making headlines by venturing into this space with two new equity income products. However, Commodity ETCs and ETFs faced outflows of €2.2 billion despite an increase in gold prices, which are the primary assets in this segment.


Strategic-beta ETFs experienced outflows of €1.5 billion, primarily due to disinvestment from value and risk-oriented strategies. On a positive note, thematic ETFs rebounded, recording inflows of €350 million, with social themes being the most favored.


Despite market fluctuations, projections for the European ETF market remain optimistic. Lipper forecasts the market to reach €2.5 trillion by 2030.



In terms of market share, iShares led the pack with €14.1 billion in inflows, followed by Xtrackers (DWS) with €8 billion and Amundi at €5 billion. Despite a slight dip, Xtrackers saw its market share grow to 10.6%, while Amundi remained the second-largest provider in Europe with a share of 12.6%.

Jose Garcia-Zarate, associate director of passive strategies at Morningstar, commented on the trends, stating, "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."

The European ETF market continues to evolve amidst changing investor sentiments and geopolitical dynamics, showcasing resilience and adaptability in the face of challenges.



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