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Lyxor ETF Barometer – European Smart Beta ETF Market Trends Q3 2017

The European Smart Beta ETF market had modest inflows of EUR555m in Q3 2017…..


Q3 2017 in brief

Marlène Hassine – Head of ETF Research – Lyxor ETF


Net New Assets at the end of the quarter stood at EUR4.0bn, meaning total Assets under Management were up 16% vs. the end of 2016 at EUR33.3bn (which includes a limited market impact of 4%). Year-to-date, flows have been fairly constant into Value and Income generation strategies with investors hunting for yield and alternative sources of return in an environment of low yields and more positive signs on the global economy. These trends were however less obvious in Q3, with limited flows on Smart Beta overall.

– Flows to Risk based ETF were modestly negative in Q3 (-EUR60M), as they are for the year so far. Despite high valuations on stock markets (especially in the US), investors have so far felt no need to protect their portfolios. Instead, outflows were focused on Europe underlyings, with volatility decreasing and less economic policy uncertainty.

Factor allocation ETFs enjoyed the bulk of the inflows in Q3 at EUR1.1bn vs. EUR719M in Q2. Momentum stood out, having gathered most of the flows with EUR438M. Value, which has gathered very strong flows throughout the year, continued to collect in Q3 albeit more slowly. Multi-Factor ETFs registered a strong rebound at EUR431M after H1 outflows.

Fundamental ETFs saw Q3 outflows of -EUR439M vs. EUR743M in Q2. Flows into income generation strategies were very weak this quarter, but outflows were mainly focused on micro-weighted strategies with –EUR513M. Europe Fundamental ETFs gathered EUR205M, but US-related counterparts had outflows of –EUR195M. This may be because eurozone equities tend to outperform US equities during periods when policy uncertainty is reduced and PMI results are higher (as a proxy for economic growth momentum).

Source: ETFWorld

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