More than 85% of European-domiciled UK-focused actively managed equity funds underperformed their benchmark over the past year, nearly a four-fold increase on calendar year 2015 when 22.2% of funds underperformed, according to latest research from S&P Dow Jones. Furthermore, across UK equity funds, 60.0% underperformed over three years, 63.1% over five years and 77.1% over ten years. The results support the ongoing argument that passive funds, such as ETFs, offer better value and performance than their actively managed counterparts.

European-listed equity ETFs have seen positive inflows of €4.6bn between July and September, the first quarter of positive inflows this year as investors poured €2.5bn into US large cap and €3.3bn into emerging market ETFs. Jose Garcia-Zarate, Associate Director of Passive Strategies Research for Morningstar, notes that the relative strength of the US market, and a more positive outlook for emerging markets, are significant factors driving these flows.

By Viktor Nossek, Director of Research, WisdomTree Europe:

Europe’s investment case is underpinned by a structurally-led – and not a cyclically-led economic recovery. We anticipate growth to pick up over the course of the next 12 months, propelled by consumer spending mainly in the Eurozone and the UK, along with a modest pickup in investment spending. Net exports and government spending will work as stabilisers but not drivers for growth.

Investors in UK gilt ETFs have been hit by yields reaching their highest point since Brexit this week – 10-year gilt yields struck 1.2% on 17 October, more than double its low point of 0.52% on 12 August. London-listed ETFs tracking UK gilts, such as those from iShares, SPDR ETFs and Lyxor, have all seen their values eroded over this period. According to Laith Khalif, senior analyst at Hargreaves Lansdown, investors should not however be overly concerned over further price falls. “Income-starved investors can only ignore rising yields for so long, before they get tempted in, which puts something of a floor under the bond market,” she said.

Nine new ETFs were launched on London Stock Exchange in September, bringing the number of ETF listings for the year to 100. Nine other ETPs have been listed on the exchange in 2016. iShares listed four global thematic ETFs, First Trust and ZyFin partnered to bring out Europe’s first physical Indian Equity ETF, PowerShares launched an ETF tracking US fallen angels, Source introduced a low volatility US equity ETF, Deutsche launched a USD Asia ex-Japan corporate bond ETF, and UBS rolled out a US corporate bond ETF with an interest rate hedge.

Fund platform research firm Platforum has published its latest UK fund distribution report on passives, ETFs and smart beta. The research reveals that while tracker fund assets have doubled since the implementation of the RDR, supported by widespread take-up by financial advisers, ETF adoption by financial advisers has been significantly less pronounced.

European ETF provider Source has launched the Source GPR Real Estate Europe UCITS ETF (REES) on Deutsche Börse’s Xetra and Frankfurt exchanges. Tracking the Global Property Research 75 Liquid Developed Europe Real Estate Index, the ETF gives investors access to the performance of 75 leading real estate companies or REITs listed in Europe, including those operating in the office, residential, retail, industrial, healthcare and diversified property segments.

Addressing a Conservative Party conference in Birmingham, UK Prime Minister Theresa May announced: “We will invoke Article 50 no later than the end of March next year,” indicating that Britain will leave the EU in early 2019. In response, the British pound fell to a seven-week low against the US dollar and a three-year low against the euro during morning trading in London on 3 October 2016. Weaker Sterling was positive for UK equities, however, with ETFs tracking the FTSE 100 or FTSE 250 indices achieving gains of over 1% during the day.

Exchange-traded fund provider iShares has cross-listed the iShares Core FTSE 100 UCITS ETF on Deutsche Börse’s Xetra and Frankfurt exchanges (Ticker: IUSZ). The ETF gives investors access to the performance of the FTSE 100 Index, the flagship reference for large-cap blue-chip stocks listed on the London Stock Exchange. As of 28 September 2016 the iShares Core FTSE 100 UCITS ETF has over £4.1bn in assets invested in the fund and, with a total expense ratio of just 0.07%, is one of the cheapest means of accessing exposure to the index.

According to a recent statement from the Bank of England, the UK may still face a “challenging period of uncertainty and adjustment” in the wake of the Brexit referendum. The Bank’s Financial Policy Committee said that although immediate capital market volatility has calmed down since June, there remain elevated risks, such as the threat of a “sharp adjustment” in the commercial property market and the danger that foreign investors could divest from the UK. UK property ETFs such as the iShares UK Property UCITS ETF (LON: IUKP) are down roughly 10% year-to-date.