A tumultuous market is still seeing European investor adopt exchange-traded funds, says a report from Cerulli.
The findings in Cerulli Edge – European Monthly Product Trends reveal that ETFs saw inflows of €77bn in 2022, down from €159bn in 2021. Despite this, Cerulli says that European-domiciled ETFs saw a net surplus in inflows, while active mutual funds registered a high level of outflows.
Fabrizio Zumbo, director, European asset and wealth management research at the firm, said: “The ongoing innovation in the ETF field is giving local investors a diverse array of options in terms of asset classes and sectors. A growing number of managers are also entering the ETF space with highly specialised offerings in the smart-beta and active ETF domain.”
Cerulli said it expects that appetite for thematic ETFs will grow across Europe, given that private clients are increasingly buying into the narratives behind products.
Zumbo added: “Managers that can tell compelling stories will be well placed to succeed in this arena. ETF issuers need to work with clients and distributors to relay the message that megatrend-based investing is a long-term concept, with a five-to-10-year horizon. Clients want partners that can pitch a convincing narrative for why a particular theme is resistant to or can overcome any short-term noise.”
While active ESG products registered a high level of outflows in 2022, ESG ETFs continued to gather net inflows, albeit less strongly than previous years. According to 83% of the ETF issuers Cerulli surveyed, incorporating ESG factors into their existing ETF ranges or launching new ESG ETF strategies is a high priority.
Overall, despite 2022’s challenging environment, the prospects for ETF assets across Europe over the next two years remain positive, Cerulli research indicates. Some 45% of the asset managers in Switzerland and Italy expect fast growth (greater than 10%). Although only 10% of respondents in France and 12% in the UK expect fast growth of ETF assets, 68% in the UK expect moderate growth (6% to 10%) in the country over the same period. Half of the respondents in France expect slow growth (1% to 5%) in the next 12 to 24 months.