Lyxor ETF Barometer – European Smart Beta ETF Market Trends

European Smart Beta ETF market flows slowed down in Q4 2016 at EUR546M. Net New Assets (NNA) for 2016 amounted to EUR7bn. Total Assets under Management are up 50% vs. the end of 2015, reaching EUR 27.4 billion and including a significant market impact (12%). New assets into Smart Beta ETFs were over one and a half times the level for the whole of 2015…..

Q4 2016 in brief

Marlène Hassine – Head of ETF Research – Lyxor ETF

For 2016, ETF flows were sustained especially in the income generation & value strategies as investors looked respectively for yield and alternative sources of return in a low interest rate environment, and more positive signs on the economic front.

Risk based ETFs saw significant outflows in Q4 at EUR1.5bn vs. a year to date quarterly average of EUR318M. Flows were mainly negative on Min Vol/ Min var ETFs at EUR1.7bn in Q4 after a first half totaling more than EUR2.4bn of inflows. On these ETFs, flows started to reverse in August and outflows accelerated in September at EUR602M. Interestingly, these outflows were split between US and European underlyings respectively of EUR775M and EUR563M. This was in a context of decreasing uncertainty on the US following Trump’s election and more positive economic news coming from Europe.

Fundamental ETFs saw limited inflows in Q4 at EUR251M vs. a 2016 quarterly average of EUR560M. Income generation strategies saw limited flows of EUR18M in a context of increasing interest rates. These were split into outflows from US and European ETFs of EUR249M while Global ETFs saw inflows of EUR223M. In the other micro weighted strategies, renewed investor confidence in the Japanese economy triggered some inflows into JPX-Nikkei 400 ETFs at EUR212M in Q4 2016.

Factor allocation ETF flows were positive throughout 2016 with a strong acceleration in Q4 at EUR1.7bn, vs. a 2016 quarterly average of EUR872M. The value factor was the winner in terms of flows in Q4 2016, boosted by stronger economic confidence following Trump’s election. The Low Vol factor also saw an acceleration of flows at EUR428M in Q4 2016. Flows were mainly focused on Developed World Country underlyings followed by European underlyings.



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