Market Trends of Europe Fixed Income Assets Management Industry
Increasing Number of Exchange Traded Funds in Europe
Investors have shown a growing interest in ETFs due to their liquidity, diversification benefits, and cost-effectiveness. This demand has led to the introduction of new ETFs to meet various investment objectives. Financial institutions and asset managers are continually innovating and introducing new ETF products to capture specific market segments, asset classes, or investment strategies. The rise of thematic and environmental, social, and governance (ESG) investing has spurred the creation of ETFs focused on specific themes, industries, or sustainability criteria.
ETFs employing smart beta or factor-based investment strategies have gained popularity. These strategies go beyond traditional market-capitalization weighting, providing investors with alternative risk and return profiles. ETFs have expanded beyond traditional equity and fixed-income asset classes. New ETFs cover commodities, currencies, real estate, and other alternative investments. The European ETF market has seen the introduction of ETFs tracking specific geographic regions, allowing investors to gain exposure to markets outside of Europe. The cost-effectiveness of ETFs, typically associated with lower management fees compared to traditional mutual funds, makes them an attractive investment choice.
Bond Market in United Kingdom Aiding Market Growth
Fixed-income funds are securities funds that invest their assets primarily or exclusively in variable or fixed-income securities. The bond issuers are either governments, multinational organizations, or companies. The fund invests primarily in Euro-denominated government and investment-grade corporate bonds. Returns are predominately driven by yield curve positioning, asset allocation, sector allocation, and security selection. UK gilts and non-gilts (primarily made up of corporate bonds) outperformed global bonds, returning 9% and 8%, respectively. Growth in allocation to overseas bonds coincided with the United Kingdom's decision to exit the European Union. The net retail sales of fixed-income funds amounted to USD 357 million in December 2021.
