A happy new year for European ETFs…..
By Marlène Hassine Konqui, Head of ETF Research and Kristo Durbaku, ETF Research Analyst
Net new assets in the European ETF market tripled to €7.6bn in January from the €2.5bn we saw in December.
Equity flows rebounded (€1.6bn from -€1.5bn) led by strong inflows into emerging markets equities (€2.4bn).
In contrast, their developed market counterparts suffered a poor start due to some significant outflows (-€2bn) from US equities.
Having lagged way behind equities in 2018, fixed income ETFs enjoyed their best month ever (€6.2bn), led by developed and emerging market government bonds (€2.2bn and €2.4bn respectively).
Smart Beta ETFs also enjoyed a largely positive month with net new assets of €1.4bn, but commodity flows continued their seemingly endless decline.
Special Focus: Investors turn defensive
Investors continued to reinforce their defensive positioning in January after all of the equity market volatility we saw in Q4.
This helped to sustain inflows into some Smart Beta strategies. Net new assets of €1.4bn – split between developed (€1bn) and emerging (€400m) markets – amounted to the second-best month over one year.
Quality strategies and income-generating ETFs led the way and reached a record high of €1bn.
Nearly all of these flows were concentrated in developed markets. Europe took the lion’s share with €451m of inflows – another new record.
This is all the more remarkable given traditional European equities suffered outflows of €1.3bn. Attractive equity valuations kept investors interested and invested, despite the significant economic uncertainty.
Investment into other defensive strategies were also significant. Minimum volatility and low volatility factor strategies gathered inflows of €496m – albeit those flows were mainly concentrated in the emerging markets (€340m).
Ultimately, we expect this renewed interest in Smart Beta to endure for some months given significant political and economic uncertainties and improvements in the credit markets.