The observatory, launched by BNP Paribas Asset Management in partnership with Quantalys Harvest Group, said last year was challenging for asset management, citing negative performance and fund flows, with outflows totalling €230bn globally.
More specifically, on average, global bond funds fell 10%, balanced funds lost 14% and global equity funds dropped 16%.
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But the research centre found this was not the case for ETFs, which raked in €67bn in 2022, in line with average annual inflows of around €70bn over the past decade.
The trend has continued into 2023, with €40bn of inflows in the first quarter, whereas net flows into actively managed funds “are flat”, it added.
The observatory argued this is due to a combination of factors, including a much wider range of ETFs available to market, with ESG strategies leading the way, and a growing interest in thematic investing.
One of the biggest factors in the surge of popularity for ETFs has been a growing demand from the wealth management sector and private investors.
The observatory found ETFs are being democratised, considering they used to be the “prerogative of European institutions”.
But with online brokers and finance apps providing access to these strategies, individual investors are taking advantage of a wider pool for their investments.
ETFs have also become increasingly popular among financial advisers who are ever more using them in their fund selection.
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A new trend has arisen from French market, where ETFs are being often used in the life insurance sector, with the 44% of contracts containing at least one ETFs in 2022. On average, life insurance contracts contained 31 ETFs in 2022, up 55% from 2021.
Another key factor for ETFs’ surge in popularity among individual investors is the one surrounding fees, the observatory said, with life insurers increasingly moving towards a unit-linked fee approach.
Jean-Paul Raymond, director of research and development at Quantalys Harvest Group, said the ETF “breakthrough” in wealth management will lead to further changes and even greater popularity of these strategies.
“In addition, changes in management practices – more tactical, more digital, more thematic or more committed (i.e. focused on ESG) – favour ETFs.”
Lorraine Sereyjol-Garros, global head of ETF and index fund development at BNPP AM, added greater digital access to ETFs is making them especially popular among millennials, as such platforms are also helping to familiarise and educate clients on ETFs.
She continued: “It is within the framework of this investor education approach that we have joined forces with Quantalys Harvest Group in order to democratise the use of ETFs among as great a number of investors as possible.”
