The European ETF industry is set for a record-breaking year, according to Morningstar's latest review of the European exchange-traded (ETF) fund market, for the third quarter of 2024, which gathered €63bn of flows, up from €53bn in the second quarter.
Representing a new quarterly high, flows in the first three quarters of 2024 totalled €161bn, surpassing the total for 2023 and the previous annual high of €159bn in 2021. With a quarter still to account, 2024 is "bound to be a new record-breaking year for the European ETF industry", Morningstar said.
Jose Garcia-Zarate, associate director of passive strategies at Morningstar, said: "The European ETF market ended Q3 with a record-breaking EUR 63 billion in net inflows. Remarkably, with one quarter left in the year, YTD flows into ETFs have reached EUR 161 billion, surpassing the previous annual record of EUR 159 billion set in 2021. Assets have exceeded the EUR 2 trillion mark for the first time. Most of the Q3 inflows were directed towards equity strategies, especially in US large-cap stocks.
"Notably, we've observed a substantial increase in interest in equal-weighted S&P 500 ETFs following market volatility in August. This trend suggests that some investors are becoming wary of the high concentration in tech stocks found in traditional market-cap-weighted benchmarks.
"There was also a rise in demand for US small-cap ETFs as investors anticipate tactical opportunities stemming from the current rate-cutting cycle, moving away from core large-cap investments.
"Elsewhere, active ETFs, which have captured significant attention, attracted EUR 4.8 billion and represented 7.7% of all ETF flows for the quarter. While this segment is experiencing triple-digit organic growth rates, it is still growing from a very low base - active ETFs account for just 2.2% of total ETF assets in Europe."
