European ETF industry staging comeback, says Cerulli

Feb 27th, 2014 | By | Category: ETF and Index News

An evolving distribution landscape and an increasingly cost-conscious investor base could revive the fortunes of the European exchange-traded funds industry following a dramatic fall in growth in 2013, according to a report from Cerulli Associates, a research firm specializing in the financial services industry.

European ETF industry staging comeback, says Cerulli

Net new flows to European ETFs slumped 25% to €13.8 billion in 2013.

Last year, net new flows to European ETFs slumped 25% to €13.8 billion ($18.9 billion), down from the €19 billion seen in 2012. It was a far cry from the heady days of 2008 when inflows hit more than €52 billion.

“Those predicting the European ETF market’s demise say it only prospered as a result of the financial crisis as investors fled derivatives and sought the relative safety of ETFs as a fast and effective way of gaining exposure to an index,” noted Barbara Wall, Cerulli’s Europe research director.

“They say ETFs are proving less attractive now that the markets are on a firmer footing. However, enthusiasts of European ETFs point to an inflow of €1 billion in January 2014, bucking the worldwide trend of outflows for that month, and suggesting a better year ahead.”

Consistent inflows last quarter helped ETFs erode the passive market share held by trackers, by 0.6%, to 55.6%.

Angelos Gousios, a senior analyst at Cerulli Associates, believes cost and transparency are material considerations for the ETF sector.

He said: “Total expense ratios (TERs) have even been as low as 0% for ETFs, with providers being able to generate income by enhancements such as dividend optimization. However, the industry needs to promote simplicity and transparency in a market that has grown too complex.”

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