Lyxor reports record high quarter for European ETF market flows
Marlène Hassine Konqui, head of ETF Research at Lyxor, writes that European ETF market flows ended the first quarter on a positive note, continuing the positive trend for 2017.
Net New Assets (NNA) in March amounted to EUR9.8 billion, giving a total of EUR30 billion for Q1 2017, a record high quarter. Total Assets under Management are up 10 per cent compared with the end of 2016, reaching EUR566 billion, including a positive market impact of 4 per cent.
Flows into both developed and emerging market equity and fixed income ETFs were positive for the month in a risk-on environment supported by an upbeat macroeconomic backdrop.
Lyxor reports that equity ETFs recorded strong inflows at EUR6.3 billion. Hassine Konqui writes: “Interestingly, flows were again focused on both developed and emerging markets ETFs amidst a supportive economic environment. Both US and European ETFs benefited from this improved situation with respectively EUR2.3 billion and EUR2.2 billion of NNA.”
Significant inflows into global developed equity ETFs also continued to reflect the increased optimism at EUR793 million. On the other hand, Asia Pacific equity ETFs saw outflows of EUR494 million after reaching a one-year record high last month as the BoJ maintained its interest rate curve control policy. On the emerging markets side, flows continued to be positive with inflows of EUR1.1 billion as the Fed maintained a rather dovish tone despite the rate hike.
Lyxor reports that those flows were mainly concentrated on broad emerging markets equity ETFs. Smart Beta ETFs experienced a strong trend reversal with outflows of EUR108 million. Flows into Quality ETFs increased slightly at EUR93 million. Flows into Value ETFs (including style + factor value) turned slightly negative at -EUR49 million after five months of strong inflows.
Fixed income ETF inflows were sustained at EUR2.9 billion. Interestingly, they were mainly focused on emerging debt and investment grade corporate bond ETFs. European govies saw outflows in a volatile rate environment. Flows into emerging debt were once again positive at EUR1.2 billion as the search for yield continued.
“Yet high yield ETFs saw outflows of EUR406 million with valuations becoming stretched. Investment grade corporate bond ETF flows reached EUR1.9 billion, an 11-month record high. 40 per cent of those flows went to short duration or floating rate bond ETFs in order to reduce interest rate sensitivity. Flows into inflation-linked ETFs slowed down at EUR148 million vs. EUR948million in February,” Hassine Konqui writes.
Commodities ETF flows were what Lyxor describes as ‘rather significant’ at EUR523 million vs. EUR209 million in February, and were mainly on broad commodity ETFs.