LGIM : The European ETF market has posted another record year, with net flows hitting over EUR115bn so far in 2021 (versus EUR100bn over the full year in 2020).
Cosmo Elms, Head of ETF Business Legal & General Investment Management (LGIM)
The wider ETF market
Equity ETFs have accounted for three quarters of total net flows and in the Thematic space we are seeing another bumper year, with net flows of over EUR10bn already.
Growth of Thematic ETFs
The Thematic ETF market has grown nearly threefold from EUR13.5bn at the end of H1 2020 to over EUR38.5bn at the end of August this year.
The thematic ETF market has also evolved over this period, with many investors adopting Global thematic exposure as part of a changing approach to asset allocation, moving away from traditional regional building blocks. We have also observed adoption of thematic ETFs across an increasingly broader set of client channels, including pension funds and other institutions in Europe.
The consideration of ESG impacts is also becoming more important to investors in Europe who invest in long-term themes. So far this year over 60% of Thematic ETF net flows have gone into ETFs that have received Article 8 or 9 classification under the EU Sustainable Finance Disclosure Regulation.
Investors are increasingly seeking investment strategies that provide exposure to companies driving the growth towards a cleaner and greener economy globally, as well those companies that have a positive social impact, like those reducing inequalities in healthcare systems worldwide.
ETF product innovation
Another key tailwind is the fact that the ETF market is driving much of the product innovation taking place across the asset management industry today. Some asset managers are leading from the front when it comes to product innovation, identifying important gaps in the market and providing investors with solutions that go beyond the current standards and expectations across much of the market.
In order to do this, asset managers must deploy a pro-active approach to designing new investment strategies, especially for index tracking products. This means investors benefit from a forward thinking methodology, supported by active research which are differentiated from the more vanilla index products and can make meaningful impact across all asset classes.
The ETF is also considered an increasingly accessible, pooled, UCITS vehicle and the investment fund of choice for a very diverse range of investors; from individuals in their savings plans right through to some of the most sophisticated asset owners in the world.