Investors piled a record-breaking of €247 billion into European exchange-traded funds and exchange-traded commodity funds in 2024, comfortably exceeding the previous high of €159 billion set in 2021 and leaping ahead of the €145.4 billion recorded in 2023.
By the end of the year, assets under management had soared to nearly €2.18 trillion, a 33% increase from the previous year. The market share of ETFs rose to 29.66% as of November 2024 from 26.51% in November 2023.
Key Takeaways from 2024 ETF Flows
- 2024 Was a Record Year: The ETF market attracted €247 billion in flows, surpassing the previous record of €159 billion in 2021
- Equity ETFs Dominate: Equity ETFs saw €197.2 billion of inflows, driven by strong demand for US and global large-caps, which accounted for 80% of total ETF flows.
- Active ETFs Surge: Actively managed ETFs tripled their inflows to €19.1 billion, now representing 7.7% of total ETF flows.
- ESG and Thematic ETFs Face Challenges: ESG ETF flows declined by 24% to €32.4 billion, and thematic ETFs experienced outflows for the first time in a decade.
“2024 was the strongest year on record for the European ETF industry. Equity ETFs were the undisputed winners of the year, amassing €197.2 billion in flows—more than double the figure from 2023—and accounting for a dominant 80% of total flows,” said Jose Garcia-Zarate, senior principal of manager research for Morningstar.
Flows Into US Equity ETFs Gain Momentum on Trump Trade
Strong demand for equity ETFs was driven by a preference for US stocks, particularly after Donald Trump’s victory in the US presidential elections.
“In Q4, US large-cap blend ETFs attracted €37.6 billion, with the ‘Trump trade’ also extending to smaller market caps. Investors are betting that his protectionist agenda will provide a further boost to valuations,” Zarate said.
Meanwhile, 2024 saw further outflows from ETFs in the Germany and UK large-cap equity categories. Political instability in Germany and the mixed reception to the UK Labour government’s first Budget hurt sentiment.
Bond Investors Prefer Short-Duration Strategies
Bond ETFs struggled to maintain momentum. Flows declined to €47.4 billion from €57.3 billion in 2023. Despite the downward pressure on yields brought by the rate-cutting cycle, investors retained a bias for strategies with a short maturity of up to one year.
ETFs in the USD and EUR ultrashort bond categories, which feature cash-management funds with a maturity of up to one year, were among the most popular in the fourth quarter.
The fastest growing bond category in 2024 were fixed-term ETFs, which garnered €5.1 billion, resulting in an impressive organic growth rate (OGR) of 269%, with the OGR calculating inflows relative to the assets at the beginning of the period. Assets in this category grew to €7.4 billion from €1.9 billion in 2023.
Commodity ETCs and ETFs saw outflows of €7.4 billion in 2024.
ESG and Thematic Strategies Suffer, Active ETFs Shine
Environmental, social, and governance strategies also faced headwinds. ESG ETF flows dropped to €32.4 billion, a stark fall from €42.8 billion in 2023. This decline coincided with heightened regulatory uncertainty and another year where ESG strategies underperformed their traditional counterparts. By the end of the year, ESG-focused equity ETFs accounted for €325.3 billion in assets, up from €256 billion in 2023, though their share of total ETF equity flows fell sharply from 34% in 2023 to just 11% in 2024.
Assets in ESG bond ETFs totaled €91.3 billion in 2024, up from €78.2 billion in 2023, with flows into this category netting €2.4 billion in 2024.
“Alongside this, thematic ETFs saw €1.1 billion in outflows during 2024, the first year of disinvestment in the past decade,” said Zarate. “ETFs tracking the energy transition theme led the outflows, while those tracking the security, AI and big data themes were in demand.”
Overall, assets in thematic ETFs grew modestly to €37.8 billion.
Amid these challenges, active ETFs emerged as a bright spot. Flows into actively managed ETFs surged to €19.1 billion, nearly tripling the previous year’s total. This segment now accounts for 7.7% of all ETF flows, up from 4.6% in 2023. Assets in active ETFs account for 2.5% of total assets invested in ETFs in Europe, up from 1.8% in 2023.
J.P. Morgan solidified its dominance in this area, capturing a commanding 54.6% market share, while other players, such as Amundi and Robeco, made notable strides.
Commodities Underperform Again
The fourth quarter of 2024 underscored the year’s broader trends. Total flows for the quarter reached €86 billion, driven largely by equity ETFs, which alone brought in €78.5 billion. The continued strength of US equities, buoyed by macroeconomic optimism and political developments, played a pivotal role. Commodities continued their downward trajectory, reflecting persistent investor skepticism about the asset class.
In Top Spot, It’s iShares Again
BlackRock’s iShares retained its position as Europe’s leading ETF provider, capturing €84.4 billion in flows and holding a commanding 42.2% market share. Xtrackers and Amundi followed, with inflows of €36 billion and €27.5 billion, respectively. Amundi retained second spot with a share of 12.4% and Xtrackers was third with 10.9%. Together, the top 10 providers accounted for the lion’s share of the market’s AUM, underscoring their entrenched dominance.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.
