Use Your Computer to Make Informed Decisions in Stock Trading: Practical Introduction — Part 11: [2023 Update] Passive Investing with ETFs in Europe

Ivan Brigida
9 min readJul 5, 2023
Visiting boats in Castletownshend, Ireland

[HINT] You can read my previous articles on Medium or on the website PythonInvest (which features more dynamic content). The complete Python code (Colab notebooks) can be found on Github.

Summary of Results

01.Continued rapid growth of new ETF funds (Acc)

  • 1528 funds in total (Acc) as of end of May’2023. High pace of new funds creation in the last 3 years (150+ every year)

02. Top 3 ETF providers expanded their presence in Europe during the last year

  • iShares grew 51% (160->241 funds), Xtrackers 32% (151->199 funds), Amundi 62% (117->189 funds).

03. Change in categories

  • Equity ETFs are still #1 in total count and assets (€604b), closely followed by Bond ETFs (€126b) — the only categories positive YoY on assets ( +9% for Equity ETFs, +70% for Bond ETFs).

04. Newly Created Funds

  • Equity and Bond ETFs have many newly created entities (+311 and €42b for Equity vs. +112 and +€47b for Bond YoY). A new bond ETF is 3x larger on average than an Equity ETF.

05. Change in Profitability

  • 2022 was a tough year (-13% median return), after a highly successful 2021 (+22% median) and positive 2020 (+3% median). 2023 started well (+15% annualised return based on 6% median ETF return from January 2023 until end-May).

The Rise of ETFs: An Overview of Recent Trends and Statistics (2023)

Since 2020, there has been a consistent increase in the creation of ETFs, with the total number of ETFs growing steadily from 1057 in 2022 to 1528 entities in 2023. This rapid pace of new fund creation is illustrated in the graph below, highlighting the significant growth in the ETF market:

Fig1. Newly created funds by inception date

The total assets held in ETFs have increased by 12.7% since the beginning of 2022, rising from 727,116 million EUR to 819,415 million EUR.

The majority of ETF funds are invested in equities and bonds, with crypto ETFs making up less than 0.35% of the total volume. However, there has been a significant shift within bonds and precious metals in 2023.

Given the current high inflation rate and strict monetary policies, particularly high-interest rates, bonds have become a more attractive investment instrument for investors seeking to protect their assets and combat inflation. This is in contrast to precious metals ETFs, which were theoretically considered to have a negative correlation with inflation but have failed to demonstrate this in practice.

Fig2. Comparison of EU ETFs (Accumulative) count and assets in 2022 (April) vs. 2023 (May)

Despite the economic recession in 2022, many ETF providers have expanded their offerings. For instance, as of May 23th, 2023, iShares increased their total number of entities from 160 to 239, while Xtrackers increased theirs from 151 to 199. Similarly, Amundi raised their number of entities from 117 to 189. The table below provides a detailed breakdown of the number of funds held by each company (only TOP 5 companies) and their total assets:

Fig3. Comparison of ETF Providers : count of ETFs and total assets in 2022 (April) vs. 2023 (May)

To summarize the comparative statistics between February 27th, 2023 and April 9th, 2022:

  • The number of ETFs has increased from 1,057 in 2022 to 1,528 in 2023, marking a 44.5% rise.
  • There were 244 newly created funds with an inception date during this period.
  • 53 funds were either liquidated or merged.

Overall, the ETF market has experienced significant growth, with a notable increase in the number of available funds. Additionally, there have been some changes in the composition of the market due to the closure or consolidation of certain funds.

[Technical details]
Please take note of the following:

The increase in the number of funds in 2023 is not solely due to the creation of new funds, but also due to the scraping mechanism itself. The country or IP address from which the scraping is conducted is critical. For instance, some funds that have limited marketing distribution rights to Germany may not appear in the search results if the country of scraping is Switzerland.

Additionally, it is important to note that the funds that have disappeared from the 2023 list were not necessarily liquidated or merged. It is possible that some of these funds lost their marketing distribution rights in the country from which the scraping was conducted.

Newly Created Funds

As previously mentioned, there are 471 fewer ETF entities in the current scraping period compared to the previous one (1,528–1,057=471) in the last 410 days (9 Apr’22 to 23 May’23). However, only 244 of these entities are newly created ETFs, as evidenced by their inception date. The remaining 227 entities have appeared due to changes in scraping location and possible changes in marketing and distribution rights.

Moving on to the funds created since April 9th, 2022, the total assets of these newly created funds amount to $8,830 million EUR, which accounts for only 1% of the total funds assets, but 16% of the funds count.

The table below provides a detailed breakdown of the number of newly created funds held by each company and their total assets. Once again, the Equity and Bonds categories hold the top positions in terms of both the sum of assets and the number of funds created, while crypto ETFs account for less than 0.8% of the total volume:

Fig4. Newly created funds between April 2022 and May 2023

The full list of new funds can be found on Colab. In the meantime, take a look at this Word Cloud featuring some of their names:

Fig5. World cloud from the names of the newly created funds between April 2022 and May 2023

2023 Liquidated/Merged Funds: Precious Metals Dominate

The total amount of liquidated or merged funds in 2023 is 16,678 million EUR, representing less than 3% of the overall funds. For a more comprehensive overview, refer to the table below, which outlines the number of funds in each asset category and their corresponding sums.

Precious Metals is the leading category, with the highest sum of assets and the most liquidated funds:

Fig6. Liquidated/Merged funds assets and count

Tenured ETF Funds (>1 year): Changes in Sum of Assets, Returns, and Risk Metrics

We will only analyze funds that were present in both the previous scraping period (April 9th, 2022) and the current scraping period (May 23rd, 2023). In total, there are 1004 ETF funds that meet this criteria.

Looking at the change specifically in these 1018 ETF funds, we can see that the total sum of assets has increased from 710,438 million EUR in 2022 to 713,022 million EUR in 2023. The following information provides a detailed breakdown of the difference in sum of assets by category, for these 1004 ETF funds:

Fig7. Year-on-year growth of ETF categories

The crypto category has experienced a significant decrease, with total assets falling from 3,432 million EUR to 2,156 million EUR. Additionally, there has been a slight decrease in the Equity, Money Market, Precious Metals, and Real Estate categories. The only category to show a slight increase in total assets is the Bond ETF.

In addition, we analyze the overall return metric (%) for different years and take note of the YTD for 2023, which appears highly skewed due to the inclusion of a crypto ETF that contains Solana. In such cases, it is crucial to examine the median returns (50% percentile), which currently stands at 18.5% YTD. This figure indicates a substantial increase in the market at the beginning of 2023, especially when compared to the previous year of 2022, which experienced an overall negative return during the recession.

Fig8. Returns percentiles on Year-to-date (YTD) annualised, 2022, 2021, 2020

When comparing returns across different years, it’s essential to keep in mind survivorship bias. To account for this, we should only include ETFs that are currently active while disregarding those that have terminated their activity.

In 2023 (end-May), the crypto ETF had the highest annualized return at 193.3%, followed by Equity ETFs (25.2%) and Precious Metals ETFs (6.6%). However, returns by category differ significantly across YTD, 1-year, and 3-year periods. Therefore, it is crucial to check the longer history of returns, preferably 3 to 5 years, and compare return per risk for 1 or 3 years.

If we look at the returns over 3 years and return per risk over 3 years (also known as Sharpe ratio), commodities, cryptocurrencies, and equity are the three winning classes.

It’s important to keep in mind that Sharpe ratios are just one metric to evaluate performance and that investors should consider other factors such as fees, diversification, and their own risk tolerance when making investment decisions. Additionally, historical performance does not guarantee future results.

Fig9. Returns and return-per-risk sliced by ETF classes

Detailed Dynamic graphs for verticals, returns, and low/high range (update 2023)

NOTE: please go to the website article link to see the dynamic graphs in action: https://pythoninvest.com/long-read/2023-passive-investing-with-etfs-europe

Sunburst chart: ETFs by 3-level category (total funds assets in 2023)
Comment: use this graph to understand the market landscape — where do people invest to?

Fig10. 3-level categorisation of EU ETFs by assets under management

Returns 3 years distribution and box plots
Comment: use this graph to understand the distribution of long-term returns (3 years) and the quartiles (25%-50%-75%) for the more common cases of return

Fig11. 3-years returns by ETF asset class

Returns 1 year distribution and box plots
Comment: use this graph to understand the distribution of short-term returns (1 year) and the quartiles (25%-50%-75%) for the more common cases of return

Fig12. 1-year returns by ETF asset class

The distribution of Total Expense Ratio (TER) by ETF Class
Comment: use this graph to understand the expense ratio (fees paid to fund)

Fig13. TER by ETF asset class (fees paid to fund)

TreeChart 3-level categorisation of returns 3 years (Long-term return)
Comment: use this graph to understand the individual size of a fund class and its long-term return (color)

Fig14. TreeChart diagram of 3-years returns by ETF class

TreeChart 3-level categorisation of returns YTD (Immediate returns — Year-to-date until end-May 2023)
Comment: use this graph to understand the individual size of a fund class and its short-term return (color). Compare it to the previous graph

Fig14. TreeChart diagram of year-to-date (2023 Jan to May) returns by ETF class

Conclusion

In conclusion, the ETF market has experienced a significant rise in recent years, with the number of available funds increasing steadily from 1057 in 2022 to 1528 entities in 2023. The market has seen a shift in investor preferences, with bonds becoming a more attractive investment instrument recently.

However, it is important to note that the increase in the number of funds is not solely due to the creation of new funds, but also to the scraping mechanism itself. The funds that have disappeared from the 2023 list were not necessarily liquidated or merged, as some of them lost their marketing distribution rights in the country from which the scraping was conducted.

Overall, the ETF market remains a dynamic and evolving sector that investors should continue to monitor closely.

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Ivan Brigida

Data and Product Analyst at Google. I run a website PythonInvest.com on Python programming, analytics, and stock investing.