European ETFs flows accelerate. Net new assets in the European ETF market accelerated in February to reach €13.7bn….
By Marlène Hassine Konqui, Head of ETF Research and Kristo Durbaku, ETF Research Analyst
All categories (equities, fixed income, commodities and smart beta) enjoyed a positive month for the first time since last February.
Equities attracted most of the inflows (€8.2bn) with three regions standing out: developed markets (+€2.8bn), global equities (+€3.4bn) and emerging markets (+€1.9bn).
Fixed income ETFs continued to enjoy massive inflows (+€5.4bn) driven by corporate bonds and emerging market government bonds (+€1.8bn and +€1.4bn respectively).
Flows into Smart Beta strategies slowed but remained positive (+€462m) and commodities (+€200m) finally ended a month in the black after seven successive negative months.
Sentiment reverses for corporate bonds
Flows surged into investment-grade corporate bonds in February 2019 given a more positive trend in the credit market.
Year to date, inflows already amount to €2.4bn, offsetting all of the 2018 outflows (- €1.6bn) in just two months.
All of the positives are to be found in the European corporate bond market – where the ECB has found itself unable to remove all of its support given the sluggish economy and now is to launch another TLTRO.
In contrast, the market suffered last year as the central bank wanted to conclude its QE programme and looked set to withdraw more of its support.
Investors are returning to this segment of the market on hopes that slowing growth will force the ECB to remain dovish.
This has already had an impact on German bond yields, which have tightened since the beginning of the year.
In fact, euro corporate bond flows seem to have been inversely correlated to German interest rate moves since the start ECB LTROs.
Should the ECB continue to increase stimulus, we expect positive flows into corporate bonds to continue in 2019.