ETF investors favour corporate bonds and gold amid market uncertainty, but equity rebounds, latest Morningstar ETF flows data reveals

19 July 2016

The European exchange-traded-fund market netted nearly EUR 8 billion of new money in the second quarter of 2016, a decline from the EUR 11 billion of net inflows registered in the first quarter. Assets under management at the end of the second quarter amounted to EUR 482.4 billion, a 4.2% increase from the end of the previous period. The two asset classes garnering the bulk of ETF investors’ interest were fixed income, with EUR 6.75 billion of net new money, and commodities—mostly gold—with EUR 3.3 billion of net inflows. Meanwhile, investment in equity ETFs remained on the back foot for the second quarter running, with a total of EUR 2.7 billion withdrawn during the period. However, the bulk of these redemptions took place in April and May, whereas June bucked the trend, with net inflows of EUR 1.2 billion.

Further findings from Morningstar’s Q2 2016 ETF fund flows report include:

In the first half of the year, investors channelled just shy of EUR 19 billion into ETFs.
Strategic-beta (commonly known as smart beta) ETFs attracted EUR 2.16 billion of net inflows in the second quarter. This represented 27% of the total for the European ETF market.
The first half of 2016 recorded the best half-yearly outcome on record for European exchange-traded-products that provide exposure to commodities, even surpassing the figures seen during the rush to gold at the height of the eurozone debt crisis in 2012.
In terms of providers, iShares was again the top money-gatherer with EUR 5.25 billion of net inflows. By contrast, db X-trackers and Lyxor have not had a good year so far and have lost market share to competitors.

Jose Garcia-Zarate, Associate Director of Passive Strategies Research for Morningstar, comments:

“Given the general investment environment, we see these figures in a positive light. Investors had a tough time in the second quarter of 2016. Most prominently, the uncertainty over the potential result—and implications—of the UK’s referendum on European Union membership warranted a cautious approach to investing. The two most commonly adopted strategies were either to sit tight and wait to see the actual outcome of this key risk event, or to seek shelter in presumed safe havens.”

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