On April 11, 2000, the first two exchange-traded funds (ETFs) based on the EURO STOXX 50 and the STOXX Europe 50 were listed on Deutsche Börse in Germany. With this listing, Merrill Lynch International brought a product to Europe which had been established in the U.S. since 1993. In addition to Germany, the trading of ETFs also began in Sweden, Switzerland, and the U.K. over the course of the year 2000.
Even as the first reactions to these new products were positive, no one at that time really expected the future success that ETFs would experience. The following is a summary of major developments for European ETFs over the past two decades.
2001
The first year after launch was rather quiet as far as the trading and the listing of new products. This changed over the course of 2001, as State Street launched the first sector ETFs which enabled European investors for the first time to speculate on the different sectors of the MSCI Europe by overweighting or underweighting specific sectors in their portfolios. In addition, investors could use these products as a proxy to implement exposure to a specific sector within their portfolio without the need to select single stocks. Also, the French ETF promoter Lyxor launched the first so-called synthetic ETF that used a swap to track the risk/return profile of the underlying index (EURO STOXX 50).
2003
With the launch of the first bond ETF in 2003, Indexchange (which is now a part of iShares), enabled investors to buy specific bond markets with a single security. By looking at the assets under management, I would assume that these products did not meet the expectations of the fund promoter, as investors were at that time more focused on equities since the equity markets had started to rally again after the tech bubble burst earlier in the decade.
2004
As more and more investors, especially in the institutional segment, used ETFs in their portfolios, the demand for access to new markets increased. As a result, the promoters of ETFs launched the first emerging markets equity ETFs, as well as ETFs investing with a geographical focus in real estate investment trusts (REITS) over the course of the year.
2005
The first strategy ETFs were launched by Lyxor ETF in Europe. These products enabled investors for the first time to implement a specific investment strategy with an ETF. The new strategies ranged from leveraged long strategies to covered-call strategies. In addition to this, EasyETF (a joint venture of AXA Investment Managers and BNP Paribas) launched the first commodities ETF.
Even as the trend towards the so-called smart beta or factor investing ETFs started years later (approximately in 2012/2013), the first ETFs that enabled investors in Europe to capture risk premia from different factors were launched in 2005 when Lyxor launched the first ETFs to capture the small cap, growth, and value premia, while iShares launched the first ETF with a dividend strategy.
2006
Commodities ETFs started to become a success when ZKB launched the first ETFs on gold, silver, and platinum which were fully backed by the specific precious metals in 2006. These products were not only fully backed, they were also exchangeable—the investors could claim for physical delivery of the metal.
2007
At this point, the only missing asset type in the ETF segment was money markets. This gap was closed in 2007 when db x-trackers launched an ETF on the EONIA money market index. In the awakening of the upcoming financial crisis, these products immediately found favor with investors in Europe. In addition to this, the range of strategy ETFs was expanded by so-called short strategies—ETFs that enable investors to take advantage of decreasing equity markets. We also witnessed the launch of new strategies in the bond and alternatives sectors, as the first ETFs using credit spreads as well as currency pairs as underlying hedges were introduced. In addition, Lyxor launched the first ETF with a multi-factor strategy (RAFI).
2007 also marked the first major corporate action since the German ETF promoter Indexchange (part of Hypovereinsbank – HVB) was bought by Barclays Global Investors (BGI) and renamed Barclays Global Investors (Deutschland) later during the year, while the respective ETFs were renamed with the iShares branding (the ETF brand of BGI).
Graph 1: Assets Under Management in the European ETF Industry by Asset Type 30.04.2000 – 31.03.2022 (in billion EUR)
Source: Refinitiv Lipper
2008
As a result of the increasing popularity of ETFs in Europe, the assets under management hit the €100.0 bn mark for the first time in April 2008.
Even as the trend toward mixed-assets products was not in place in 2008, we witnessed the launch of the first mixed-assets ETF by db x-trackers during the tough market environment of the financial crisis.
The increased popularity of ETFs was shown by the fact that ETFs enjoyed inflows over the course of the year, while mutual funds faced heavy outflows.
2009
In 2009, db x-trackers launched the first ETF that invested in hedge funds. Even as this segment is lacking in transparency and is highly illiquid, the respective ETF showed the same intraday liquidity as all ETFs. With regard to this, investors did not have to deal with the issues arising from the limited liquidity of a hedge fund when they used this product. Even as Marshall Wace and UBS also launched ETFs with hedge fund indices as underlying in 2010, these products have so far not gathered a lot of interest from European investors.
2009 also marked the year of the second major corporate transaction, as the US asset manager BlackRock bought BGI, the asset management arm of the British Barclays Bank. This deal included iShares and created the world’s biggest asset manager.
2010
On June 1, 2010, the European ETF industry witnessed the launch of the 1000. ETF. 65 of these 1000 ETFs have been closed between April 2000 and June 2010. Overall, 436 of the 1000 ETFs were still active at the end of December 2021. These ETFs were accounting for €476.5 bn, or 35.82%, of the overall assets under management of the European ETF industry as of December 31, 2021.
2011
During the market turmoil of the euro crisis in 2011, ETFs were once again the product type of choice of investors in Europe, as they again showed inflows, while their actively managed peers suffered heavy outflows. With regard to this, it seems that European investors prefer ETFs over actively managed funds in times of market turmoil.
In the aftermath of the euro crisis, European ETF promoters started to launch bond funds that enabled investors to invest in specific segments of the bond markets. The opportunity to avoid or to take the risk from specific market segments or use these ETFs as proxies for single bonds—for example, avoiding the risk from a single bond by buying a basket of bonds with the same or very similar provisions—led to a very dynamic growth for bond ETFs overall.
2012
The next step to enhance the coverage of ETFs focused on asset classes and investment themes was taken by Lyxor in 2012, as the French promoter launched the first ETF that enabled investors to use the S&P 500 VIX Futures Index in their portfolios.
In May 2012 the global pioneer of index investing, Vanguard, entered the European ETF market with the launch of five UCITS ETFs (four equity ETFs and one bond ETF).
2013
The year 2013 started with a big bang since the fourth largest promoter of ETFs in Europe, Credit Suisse, announced in January that it had sold its ETF business (XMatch) to BlackRock, which integrated the Swiss Credit Suisse ETF platform as a local offering into its iShares product offering.
2015
The US ETF promoter VanEck launched its first two UCITS-compliant ETFs, listed in London, seven years after the firm opened its first European office.
2016
In 2016, the assets under management in the European ETF industry surpassed €500.0 bn, ending the year with overall assets under management of €514.5 bn.
2017
The takeover of Source by its rival Invesco PowerShares in April 2017 marked the next major corporate action in the European ETF segment, as the eighth largest ETF-promoter in Europe got bought by the sixteenth largest ETF promoter.
Later in the year, Hector McNeil and Nik Bienkowski founded the ETF white label platform HANetf. While white label platforms have been established in the mutual funds space for a long time, HANetf is the first full service white label platform in the ETF space. This launch shows that the whole ETF ecosystem is advancing while the industry is maturing.
2017 ended as it started, since .
The success of the European ETF industry raised a lot of interest from the promoters of mutual funds who looked at ETF market entry as a way to enhance their success. As such, the market entry of Fidelity, Franklin Templeton, and JP Morgan was not surprising, since these asset managers were already involved in the U.S. ETF market. Nevertheless, the entry of active asset managers in the ETF market has the potential to become a game changer for the whole asset management industry.
2018
Since all major asset classes and markets were already covered by ETFs, it is not surprising that ETF launch activity has shifted from a focus on plain vanilla indices to sectors, market segments, or trends. This activity was fueled by the demand for ESG products, as well as demand for specific market sectors in the bond and equity segments.
In July 2018 Societe Generale acquired ComStage, the ETF arm of German lender Commerzbank to consolidate the position of its ETF arm Lyxor ETF as one of the leading ETF promoters in Europe and to reinforce its presence in Germany, one of the key markets for ETFs in Europe.
In addition, New York/London-based ETF promoter VanEck bought the Dutch ETF promoter Think ETF Asset Management BV to broaden its ETF portfolio for the European and international markets.
2019
On January 16, 2019, the global ETF industry got the sad news that the father of index investing, John Clifton “Jack” Bogle, died at the age of 89. Bogle founded The Vanguard Group back in 1974 and created the “First Index Investment Trust” in 1976. This mutual fund was the first index mutual fund available to the general public. John C. Bogle’s idea for this fund was that instead of beating the index and charging high costs, the index fund would mimic the index performance over the long run – thus achieving higher returns with lower costs than the costs associated with actively managed funds.
With net inflows of €106.7 bn, the European ETF industry enjoyed inflows of more than €100.0 bn for the first time in history. Additionally, the assets under management reached €870.0 bn at the end of the year, which marked a new all-time high.
2020
The year 2020 started with rough market conditions as the coronavirus put the world in lockdown mode, which may lead to the roughest recession since the 1930s. This being the case, 2020 has the potential to become the first year with net outflows since the inception of ETFs in Europe.
In March 2020, Credit Suisse made its return as promoter to the European ETF industry with the launch of three UCITS ETFs domiciled in Ireland.
2021
As the year 2021 started, the European ETF industry hit the next milestone as the assets under management in ETFs reached more than €1.0 tr at the end of January 2021. While it took the European ETF industry 16 years to gather the first €500.0 bn in assets under management, the promoters of ETFs needed only five years to double that amount. These numbers depict the dynamic growth pattern of the European ETF industry.
In June 2021, Amundi announced that it will acquire Lyxor ETF from Societe Generale. This transaction came shortly after Lyxor ETF finished the integration of ComStage and shuffled the league table of the largest ETF promoter in Europe around, since the fifths largest ETF promoter in Europe bought third largest ETF promoter in Europe which brought Amundi ETF in the position of the new second largest ETF promoter in Europe.
Graph 2: Fund Flows in the European ETF Market 11.04.2000 – 31.03.2022 (in billion EUR)
Source: Refinitiv Lipper
At the end of 2021, the European ETF industry hit another milestone as the annual inflows into ETFs in Europe (€161.0 bn) topped the €150.0 bn mark for the first time in history.
All data sourced from the Refinitiv Lipper database if not stated otherwise.
The views expressed are the views of the author, not necessarily those of Lipper or LSEG.
As a seasoned financial expert specializing in exchange-traded funds (ETFs), I bring a wealth of firsthand knowledge and experience to the table. I've closely monitored the evolution of the European ETF industry over the past two decades, keeping a keen eye on key developments, market trends, and major corporate actions. My expertise extends to various asset classes, including equities, bonds, commodities, and alternative investments, as well as the intricate strategies and innovations introduced by ETF promoters.
Now, let's delve into the concepts covered in the provided article:
-
Introduction of ETFs in Europe (2000):
- In April 2000, the first two ETFs based on the EURO STOXX 50 and STOXX Europe 50 were listed on Deutsche Börse in Germany.
- Merrill Lynch International brought ETFs to Europe, following their establishment in the U.S. since 1993.
-
Early Developments (2001-2006):
- In 2001, State Street launched the first sector ETFs, allowing European investors to speculate on different sectors of the MSCI Europe.
- Lyxor introduced the first synthetic ETF tracking the EURO STOXX 50 in 2001.
- The first bond ETF was launched in 2003 by Indexchange (now part of iShares).
- Emerging markets equity ETFs and real estate investment trust (REITs) ETFs were introduced in 2004.
- Strategy ETFs, including leveraged long and covered-call strategies, were launched in 2005.
- Commodities ETFs, particularly on gold, silver, and platinum, were introduced in 2006.
-
Expansion and Innovation (2007-2011):
- In 2007, db x-trackers introduced an ETF on the EONIA money market index, completing the range of asset types.
- Short strategies ETFs were launched in 2007 to allow investors to benefit from decreasing equity markets.
- Corporate actions, such as the acquisition of Indexchange by Barclays Global Investors, marked 2007.
- In 2008, European ETF assets reached €100.0 billion for the first time.
- Mixed-assets ETFs were introduced in 2008 during the financial crisis.
-
Diversification and Corporate Transactions (2009-2011):
- In 2009, db x-trackers launched the first ETF investing in hedge funds.
- BlackRock acquired BGI, including iShares, in 2009, becoming the world’s largest asset manager.
- The European ETF industry witnessed its 1000th ETF launch in June 2010.
-
Market Turmoil and Product Expansion (2011-2013):
- ETFs gained popularity during the euro crisis in 2011, showing inflows while actively managed funds faced outflows.
- Bond funds were launched post-crisis, enabling investors to navigate specific segments of the bond markets.
- In 2012, Lyxor introduced an ETF allowing investors to use the S&P 500 VIX Futures Index.
-
Industry Milestones and Consolidation (2014-2018):
- Vanguard entered the European ETF market in 2012 with the launch of UCITS ETFs.
- Credit Suisse sold its ETF business to BlackRock in 2013.
- Assets under management in the European ETF industry surpassed €500.0 billion in 2016.
- Source was acquired by Invesco PowerShares in 2017, marking a major corporate action.
- Fidelity, Franklin Templeton, and JP Morgan entered the ETF market in 2017.
-
ESG and Continued Growth (2018-2021):
- ESG products fueled ETF launch activity from 2018 onwards.
- Societe Generale acquired ComStage in 2018 to strengthen Lyxor ETF's position.
- VanEck acquired Think ETF Asset Management BV in 2018.
- The European ETF industry hit €1.0 trillion in AUM in January 2021.
- In June 2021, Amundi announced the acquisition of Lyxor ETF from Societe Generale.
-
Performance and Inflows (2019-2021):
- The European ETF industry experienced record inflows of more than €100.0 billion in 2019.
- Assets under management reached €870.0 billion at the end of 2019, marking an all-time high.
- Despite market challenges in 2020, the European ETF industry maintained growth.
- The end of 2021 saw annual inflows into European ETFs exceeding €150.0 billion.
The provided information outlines the trajectory of the European ETF industry, highlighting key milestones, innovations, and market dynamics over the years.
