Europe ETFs overtake US market
12 June 2008

Written by Sophie Baker

The assets under management (AUM) in European Exchange Traded Funds (ETF) are predicted to exceed the AUM of American ETFs in the next few months.

Since the beginning of 2006, the AUM of fixed income ETFs have grown from £4.4bn to £16.7bn at the end of May 2008, equating to a return of 73.5 per cent. AUM in US fixed income ETFs are currently at £21.8bn, and in Europe fixed income ETFs count for 21 per cent of the ETF market. Globally, this figure is currently around £40bn, split regionally as 54.74 per cent USA, 42.06 per cent Europe, and 3.2 per cent rest of the world.

Thorsten Michalik, head of db x-trackers, commented: “Europe will overtake the home country of the ETF in terms of the assets under management of fixed income ETFs within the next months.” In terms of equity ETFs, the AUM is 4.5 times bigger in the US than in Europe.

“With 74 fixed income ETFs available as of May 2008, Europe has six more ETFs than the USA, with more than 150 ETFs available worldwide. Around 15 per cent of the average turnover in Europe falls upon fixed income ETFs, while in the US it is only one per cent,” says Marco Montanari, responsible for the fixed income ETF product range at db x-trackers.

According to Deutsche Bank, the strong growth in Europe has been driven by the huge inflows in money market ETFs, which currently account for 28.5 per cent of the AUM of fixed income ETFs.

“The success of the money market ETFs shows that investors are aware of the advantages of money market ETFs in terms of tradability, transparency, no investment limitations, and daily adjustments of the interest rate,” said Michalik.

“If pension funds, which manage over 90 per cent of their assets actively and have most of their money invested into fixed income products would rearrange their portfolio by putting four per cent into ETFs, that would equal a doubling of the worldwide asset under management hold in ETFs,” he added.