The main trends we observed in the European ETF market during the first half of the year continued during the summer….
On the equity side, Europe maintains its lead, followed by emerging countries, and in the fixed income universe emerging debt is still favored by investors. 75 billion euros have already been invested into the European ETF market this year, compared with 30 billion in 2016 over the same period.
The positive sentiment on European equities continues to strengthen: between the confirmed rebound of the economy and the positively perceived results of the French and German elections, flows have accelerated to reach 11.5 billion euros since the beginning of the year. Beyond these flows directed towards the whole of Europe, France and Germany are at the top of the most sought-after country exposures in recent months.
This phenomenon is also impacting sector and factor allocations. Financial companies have raised 3 billion euros this year, of which 1 billion in September alone. Within the Smart Beta universe, small and medium capitalization stocks are at the top with more than 2.5 billion euros raised since the beginning of the year. The renewed interest in these more cyclical exposures reflects a rising level of confidence in the European market.
On the fixed income side, the allocation is also focused on riskier but higher-yielding products, as shown by the fact that Emerging countries continue to dominate the government debt sector, with more than € 8.5 billion of positive flows in 2017.
Same goes for corporate debt: recently investors’ interest has shifted towards high-yield bonds, which saw the largest inflows in September and are now part of the year to date top 3 with nearly 2 billion euros of net new assets.
The recent trend of ETF flows towards riskier assets, both in equities and fixed-income products, clearly indicates a positive investors’ sentiment.