ETFs in Europe lost 4.7 billion euros last month in ‘rare’ consecutive months of exits

Analysts doubt European-listed ETFs will cross the 100 billion euro mark this year

ETFs in Europe have gone from breaking the annual outflow record with four months to lose in 2021 to posting “one of the worst outflows on record” in the past three months.

According to data from Bloomberg Intelligence, Wrapped ETFs in Europe lost €4.7bn in three months as July marked a ‘rare second month of exits’, with €3.7bn of investor cash exiting ETFs in just four weeks .

Bloomberg Intelligence ETF analysts Athanasios Psarofagis and Henry Jim said European ETF flows are now “well behind” last year, with the sector absorbing 104 billion euros over the past seven first months of the year in 2021, compared to 55 billion euros this year.

It’s also worth noting where the current drop in assets is. Commodity exchange-traded products (ETPs) saw an exodus of 5.3 billion euros in three months while equities suffered outflows of 2.4 billion euros. Meanwhile, bond ETFs stole the show with an impressive €4.1 billion in new money.

Source: Bloomberg Intelligence

Psarofagis and Jim added: “While at first glance this may seem to paint a bleak picture of investor interest, there are encouraging signs of a more tactical use of ETPs through asset class rotations. assets, transfers to ESG funds and a spike in trading levels.”

In fact, ETF trading reached 227 billion euros in July, an “abnormally high” figure for the summer months. This suggests that investors are becoming more tactical and using ETFs to deal with market shifts such as anti-commodities in the face of recession and recent risk dynamics following assumptions that the Federal Reserve will be less hawkish in futures. political meetings.

July was also a standout month for ESG ETFs, which saw inflows of €9 billion, while strategies categorized under Article 9 of the Sustainable Financial Disclosure Regulation (SFDR) saw inflows of €3. .3 billion euros, their best month ever.

Source: Bloomberg Intelligence

Overall flows into each asset class have also not been stunning over the past 12 months. While equity ETFs saw inflows of €81 billion, that was well below the 12-month high of €137 billion.

Fixed income ETFs saw 28 billion euros in net new assets over the same period, while commodities were “essentially unchanged”, Psarofagis and Jim said.

Interestingly, this year-to-date has been shared by other fund structures on the continent. Europe-listed UCITS equity funds as a whole have amassed €24 billion in inflows so far this year, however, ETFs have outperformed mutual funds in fixed income, succeeding to raise new money while fixed income UCITS funds as a whole recorded outflows of 80 billion euros.

The question now will be whether full-year ETF flows lose their streak of 12-digit asset gains. Inflows peaked at $112 billion in 2019, $120 billion in 2020, and topped $100 billion in the first half of 2021.

At current exchange rates, the €55 billion inflow at the end of July equates to $56 billion, leaving plenty of ground for European packers to cover by the end of 2022.

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Mary I. Bruner