The assets under management (AUM) held by European exchange-traded funds (ETFs) surpassed $2trn for the first time in the second quarter as $58bn of fresh money entered the sector, according to Invesco’s latest European Demand Monitor. This represents an 88% increase over the past year.
European ETFs had a strong start to the year, raking in $106.6bn of net new assets (NNA) in the first half of 2024 – up 46% compared to the first six months of last year. It was beaten only by the $112bn inflows seen in the first half of 2021, its strongest start to a year on record.
However, Invesco’s head of ETF EMEA Gary Buxton said it was uncertain whether these strong inflows could persist into the second half of the year.
“While the macroeconomic backdrop remains supportive for financial markets generally and should continue to lead strong demand for ETFs in the second half of the year, political and geopolitical risks remain,” he said.
“The snap election in France appears likely to lead to increased uncertainty in coming months while the main focus for the second half will be the US presidential election in November.”
See also: Calastone: The ETF industry ‘desperately needs standardisation’
Despite geopolitical uncertainty, equity ETFs were highly popular in the first half of the year, taking in $84.3bn of new money. These inflows were more than double the amount they received in the first half of 2023, and brought the total AUM in equity ETFs to $1.45trn.
Global equity ETFs received the highest inflows in the second quarter at $13.4bn, but this slowed slightly from the $28.1bn they took in the first quarter. US equity ETFs came in at a close second at $13.2bn over the three-month period.
Investors may have been enthusiastic on equity ETFs this year, but they are becoming increasingly conscious of concentration risk, according to Buxton.
“Questions over concentration in markets are likely to persist, and we have seen modest flows returning to equal weight approaches as the performance gap has widened.
“Delivery of easier monetary policy in the second half of the year may prompt investors to look again at some of the other unloved parts of the market with thematic exposures a potential beneficiary.”
