European ETF market flows slowed down substantially in August…….
Marlène Hassine – Head of ETF Research – Lyxor ETF
Net New Assets (NNA) over the month totaled EUR3.2bn. Total ETF Assets under Management are up 13% vs. the end of 2016, reaching EUR585bn and including a positive market impact of 1%. Despite this slight weakness, 2017 is still on track to be a record year with EUR64.3bn of inflows as of end of August vs. EUR51.3bn until end of august 2015, the last record year. Investors’ attitude was more on the cautious side this month in a context of increasing geopolitical risk & receding inflation prospects.
Equity ETFs recorded lower inflows at EUR1.2bn. This can be partly explained by limited flows into both developed and emerging market equities. Most of these minor inflows were focused on stronger economies such as the US and German. EM equity ETFs gathered only EUR360M, just half of the 2017 average. Asia Pacific equity ETFs saw outflows of EUR160M as PM Abe and Japan’s Abenomics continued to be challenged. Global ETF flows turned negative for the first time this year at -EUR37M in a more risk-off environment. Smart Beta ETFs flows also turned negative with a third consecutive month of decreasing flows at –EUR39M. Nevertheless, those outflows were mainly from Japanese Smart Beta ETFs; flows were still positive for Value & Momentum factor ETFs at EUR120M and EUR253M, respectively.
Fixed income ETF inflows decreased to EUR2.1bn, close to the lowest monthly level of the year reached in April. The search for yield continued but only within the safest assets, i.e. investment grade corporate bonds with inflows of EUR897M. Riskier fixed income assets saw limited flows: it was the lowest month of the year for emerging debt ETFs with inflows of EUR268M, while high yield bond ETFs sat outflows of EUR69M. On the positive side, fixed income flows outpaced equity flows, mainly driven by a rebound of the safest compartment of the FI space: developed government bonds with EUR724M of inflows. These benefited from a decreasing interest rate environment due to receding inflation prospects and tapering announcement delays.
Commodities flows turned negative at -EUR126M, a year to date record low, and were mainly focused on broad commodity ETFs.