European ETFs closed the fourth quarter of 2020 by passing the €1 trillion milestone in assets, while ESG-focused funds saw their assets surge.

Inflows throughout the quarter amounted to €44.4 billion, with over €20 billion invested in environmental, social and governance ETFs, according to the latest data from Morningstar. This accounted for nearly half of the total money going into ETFs throughout the period.

In terms of broad asset class, equity ETFs took the lion's share of inflows, netting €38.3 billion, while bonds attracted nearly €10 billion. 

This influx of cash towards the end of the tumultuous year saw assets under management in the European ETF industry grow by 11% to €1.05 trillion. 

Jose Garcia-Zarate, associate director of passive strategies research, said: “This is a major milestone for an industry that is only two decades old in Europe and will surely make plenty of headlines to highlight the growing appeal of low-cost passive investing.”

He highlighted that assets in European ETFs have doubled in the last five years, adding that the outlook remains positive overall.

Flows into equity ETFs accelerated in the fourth quarter netting €38.3 billion, bringing the total to €53.3 billion for the year.

Bonds ETFs, meanwhile, drew in just under €10 billion in the last three months of the year and €36.9 billion for 2020 as a whole. 

Assets in ESG ETFs amounted to over €90 billion by year end – a “staggering” 137% increase from 2019, said Garcia-Zarate.

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