The amount invested in European ETFs fell by 11.9%, or $192 billion, in 2022, according to research by Invesco.
The asset manager found challenging market conditions slowed the pace of inflows during this period.
The firm’s European Demand Monitor report revealed total assets under management (AUM) for European ETFs had fallen to $1.42 trillion in 2022.
Despite the $192 drop, European ETFs still raised $87 billion of new assets throughout the year.
ESG became an increasingly popular investment theme in 2022, which was demonstrated as ESG ETFs recorded net new assets of $53 billion.
As a result, ESG ETFs accounted for 61% of net new assets and now represent over 16% of European ETF AUM.
Earlier this month, Morningstar reported similar findings of an increase in ESG investment in the European ETF market in 2022
Fixed income also performed well throughout the year, as fixed income AUM was expected to fall by $53 billion based on market moves.
However, strong inflows of $33 billion resulted in an overall reduction of just $20 billion or 5.7%
Within fixed income ETFs, 2022 was a strong year for US treasuries, which experienced $20 billion in net new assets. Whereas Chinese bond ETFs performed the worst with $11.3 billion of withdrawals.
Commodities saw returns of 1%, which made them the only asset class for ETFs to see positive outflows in 2022.
However, outflows of $5 billion meant that overall assets fell by 3.1% throughout the year.
Gary Buxton, head of EMEA ETFs at Invesco, warned the performance of commodities is unlikely to remain positive this year.
He said: “Unlike equity and fixed income returns, commodities held up relatively well last year, which could put them on the back foot with investors at the start of 2023.”
However, Buxton remained optimistic for other asset classes for the year ahead.
He added: “Having sold off heavily last year, many asset classes start 2023 with much more favourable valuations than at the start of last year. Looking ahead, we should see a more supportive backdrop for financial markets, and therefore ETF flows.”
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