European ETFs attracted $33.5bn in net new assets (NNA) for Q3 2023, an increase of $2.0bn versus Q2 2023, according to Invesco’s European Demand Monitor. While the quarter saw a difficult period for risk assets, with a 2.1% drop in EMEA ETF AUM, this was driven by market moves and masked a positive underlying picture for ETF flows.
The Q3 drop in ETF assets was driven by a weighted average 4.1% drop in market prices across all assets. However, given the impact of strong net inflows, total AUM finished the quarter at $1.59 trillion, up 12.4% year-to-date.
Equity flows resumed their leading position, with $21.9bn of inflows in the quarter, accounting for two thirds of total NNA, but still slightly below their 69% market share in AUM. This remains a strong year for fixed income ETF flows; Q3 saw $14.8bn of inflows (44% share), bringing year-to-date flows to $50.9bn (47% share). Commodity products experienced $3.3bn net outflows in the quarter.
Demand trends in focus:
Industry ETF flows by asset class
| Asset Class | 2022 Y/EAUM ($million) | AUM ($million) | Q3 NNA($million) | YTD NNA ($million) | YTD % Market Moves |
| Total | 1,416,125 | 1,591,635 | 33,511 | 107,637 | 4.8% |
| Equity | 955,401 | 1,090,428 | 21,897 | 59,442 | 7.9% |
| Fixed Income | 338,729 | 382,521 | 14,800 | 50,875 | -2.1% |
| Commodity | 116,009 | 110,642 | -3,264 | -3,269 | -1.8% |
- At $33.5bn, the pace of net inflows into EMEA ETFs in Q3 increased slightly compared to the previous quarter ($31.5bn) despite the general weaker tone in risk asset markets.
- US Equity and Global Equity ETFs vied for the top spot in flows with $10.3bn and $10.0bn of NNA respectively. This marks a swing back into favour for US Equities, which saw a fourfold increase in flows compared to Q2.
- Fixed income product segments took the next four spaces in the top flows table with government bonds (US Treasuries: $4.3bn, Euro Govies: $4.2bn and Gilts $2.2bn) and Cash Management ($3.4bn) products in focus.
- Commodity products dominated the outflows table with Precious Metals seeing $3.2bn of outflows, primarily focused in Gold. This negative sentiment was offset somewhat by renewed inflows into Broad Commodity ETFs with US$1.3bn of NNA.
- At 30% of year-to-date NNA, ESG flows are currently seeing half the market share that was experienced last year. A pick-up in flows in the middle of the year has fizzled out somewhat with the pace of inflows dropping this quarter.
Volatile outlook
“The final quarter of the year has the potential to remain volatile,” said Gary Buxton, Head of EMEA ETFs at Invesco. “Lingering uncertainty about the economic outlook and the future path of interest rates is likely to keep investors focused on large, liquid core exposures across asset classes in the near term, as they did in Q3.”
