Exchange-traded fund (ETF) assets in Europe reached €1.4tn by the end of last year, according to the new edition of EFAMA’s ‘Markets Insights’ series.
This, the European Fund and Asset Management Association noted, represented the lion’s share of the growth in exchange-traded products (ETPs) over the last half-decade. The report, UCITs ETFS: A Growing Market in Volatile Times, also revealed the European ETF market has displayed constant growth in sustainable investing – an area, it says, that has “considerable potential” for attracting investors.
“Our report focuses on the growing UCITS ETF market, which has been increasing in popularity among investors,” said Vera Jotanovic, senior economist at EFAMA. “The net flows of European UCITS ETFs have been consistently positive in the last five years, demonstrating resilience despite market turmoil. We also observe an increase in sustainable investing in the market – with positive net flows of Article 8 and Article 9 funds.”
According to EFAMA, the net assets of European ETPs has roughly doubled in the last five years, from €692bn at the end of 2018 to the €1.4tn it recorded at the end of last year. ETFs, EFAMA writes, account for 93.8% of total net assets, followed by exchange-traded certificates (6.2%) and exchange-traded notes (0.2%).
Shallower pools of liquidity
The trade body warned, however, that there was still a throttle on the European market because of the “present fragmentation” of liquidity and related transaction price information. This, it said, was leading to shallower pools of secondary market liquidity for ETF shares compared to other global domiciles such as the US.
“The European Commission’s ongoing effort to establish a European real-time consolidated tape – for both pre- and post-trade data – should be supported further, moving beyond the limited progress achieved in the latest review of the MiFIR framework,” it noted.
“Only a European pre and post-trade consolidated tape will provide greater transparency on the effective liquidity of ETFs, as well as greater visibility on the reference prices at which these products are being traded across various European listing venues. Furthermore, it also promises to unlock several tangible benefits for product issuers and investors alike, all while growing the European ETF market and attracting more non-EU investors to the UCITS ETF label.”