Total assets under management (AUM) of Europe-listed ETFs stood at €585bn at the end of August, up 13% from the end of 2016, despite a substantial slowdown of inflows during the month, according to the August edition of the monthly ETF barometer report from Lyxor.
YTD, Europe-listed ETFs have seen net inflows of €64 billion, significantly above the prior YTD record of €51bn recorded in 2015.
During August, equity ETFs recorded net inflows of just €1.2bn, the lowest level since September 2016. Most of the inflows that did occur were were focused on ETFs providing exposure to US equities.
Marlene Hassine Konqui, head of ETF research at Lyxor, commented: “Investors’ attitudes were more on the cautious side this month in a context of increasing geopolitical risk and receding inflation prospects.”
Emerging market equity ETFs gathered just €360 million, half of the 2017 monthly average thus far, while Asia Pacific equity ETFs saw outflows of €160m as Prime Minister Abe and Japan’s Abenomics continued to come under pressure.
Smart beta ETF flows were also negative with outflows of €39m marking the third consecutive month of outflows for this category. “These outflows were mainly from Japanese smart beta ETFs; flows were still positive for value and momentum factor ETFs with €120m and €253m of inflows respectively,” added Konqui.
In the fixed income space, flows for August fell to €2.1bn, close to the lowest monthly flows for the year. Konqui commented: “The search for yield continued but only within the safest assets, i.e. investment grade corporate bonds, which saw inflows of €897m. Riskier fixed income assets saw limited flows with emerging market debt recording the lowest monthly total of the year, just €268m, while high yield bonds saw outflows of €69m.”
However, fixed income flows outpaced equity flows, mainly driven by a rebound of the safest compartment of the fixed income space: developed government bonds which added €724m during August. “These benefitted from a decreasing interest rate environment due to receding inflation prospects and tapering announcement delays,” said Konqui.
Flows of Europe-listed commodity ETFs turned negative during August, with net outflows of €126m seen during the month, a YTD record low.
Despite the reduced flows, Europe-listed ETFs are still on track to set a new record for AUM growth in a calendar year. Year-to-date (31 August 2017) net inflows in the region amount to €64 billion, significantly above the prior YTD record of €51bn recorded in 2015.