Industry Updates

European ETF market flows bounce back in Q2

George Geddes

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The European ETF market saw net inflows of €33.4bn in Q2 2020, rebounding from the €4.4bn of outflows suffered in the previous quarter, according to a report from Morningstar.

As a result of asset growth and inflows, the European ETF market grew 16% to €903bn from €780bn at the end of Q1. This means the market is edging back to its €1trn mark it surpassed at the end of 2019 but dropped below again during the coronavirus turmoil seen in early 2020.

A big contributor to the quarterly inflows was bond ETFs which attracted €23.3bn of inflows, 70% of the quarterly new assets.

Therefore, the asset class has grown 14% from €218bn to €249bn as of the end of June.

European investors were primarily interested in euro-denominated corporate bond ETFs which captured €6bn of inflows.

However, USD-denominated corporate bond, government bond and high yield bonds ETFs also saw significant inflows following the US Federal Reserve’s programme of purchasing investment grade and high yield ETFs.

Fixed income ETFs suffer record $34bn outflows in three weeks

Equity ETFs managed modest inflows of €4bn despite assets growing 17% to €544bn, which Morningstar says reflects the strong bounce in equity markets during the quarter.

Equity environmental, social and governance (ESG) ETFs gathered €5.4bn which implies non-ESG equity ETFs saw outflows of €1.4bn.

ESG strategies across equity, fixed income and commodity ETFs attracted €6.7bn of inflows, adding to the €5.8bn seen in Q1.

BlackRock accumulated a large volume of the inflows as it owned five out of the ten equity ETFs with the largest inflows and nine out of 10 fixed income ETFs. The firm saw €19.4bn inflows in Q2 following €1.1bn outflows in Q1.

Additionally, Xtrackers saw significant inflows of €4.9bn for the quarter as well as Amundi and UBS managing to obtain €1.6bn and €1.5bn in new assets, respectively.

Lyxor, Europe’s third largest ETF issuer saw negative net flows for the quarter as it lost €500m.

Jose Garcia-Zarate, associate director, passive strategies, commented: “The second quarter was a period of solid flows for bond ETFs, with investment-grade credit at the forefront of investors’ preferences.

“Within the top five equity categories we find three sector groups— technology, healthcare, and industrial materials. This signals that investors made very pointed investment decisions to fit the expectations of how the economy might respond and evolve to the unfolding COVID-19 crisis.”

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