2023-10-16 13:11:24
In the current context of deteriorating sentiment on the financial markets, the ETF market is resilient. The European ETF Asset Flows published by Morningstar on the evolution of the outstanding assets of ETFs (Exchange-traded funds) and ETCs (Exchange-traded Commodities) domiciled in Europe in the third quarter of 2023 reports an increase of 6.3 %. The ETF and ETC market collected 29.7 billion euros in flows, or 1.8 billion more compared to the previous quarter. Over the January-September period, flows amounted to 96.5 billion euros, already exceeding the 78.4 billion euros recorded for the whole of 2022.
The overall value of these assets thus reached a new record at 1,500 billion euros. The increase, however, remains “marginal” compared to the 1.490 billion in the second quarter, the valuations of the stock and bond markets having taken a negative turn from August onwards.
Of the asset categories, 68% are invested in equity strategies, 23% in bond strategies and 7% in commodities. In detail, equity ETFs collected 19 billion euros in the third quarter, compared to 12.5 billion euros in the second quarter. The majority of flows were into global large-cap US equity classes. Despite the capital losses recorded on most equity markets, due to the fall in technology stocks over the first part of the year, equity ETF assets increased slightly. Thus, the increase in flows in the third quarter led to a slight increase in equity ETF assets, which increased by 0.6%.
Repositioning of investors
As for bond ETFs, inflows fell by 16 billion euros this quarter to stand at 12.2 billion euros. But, as in the case of equity vehicles, the outstanding amounts of bond ETFs increased by 2.1% during the period, from €343.1 billion to €350.3 billion.
“Exposure to US equity markets remained a favorite theme, while reassessment of monetary policy expectations prompted bond investors to position themselves on the shorter end of the yield curve. In fact, several of the bond ETFs that collected the most during the quarter were cash products,” said Jose Garcia-Zarate, associate director of passive strategies at Morningstar.
In fact, in terms of categories, investors favored government bonds during the third half of the year. Euro-denominated government bond ETFs attracted more than €3.2 billion, followed closely by ETFs in the US dollar government bond category, with exactly €3.2 billion. In addition, the launch in August by iShares of the first dated bond ETFs in Europe (iBond ETF) garnered flows of 300 million euros in this category.
Conversely, the divestment trend is increasing for commodity ETCs and ETFs. While in the second quarter the outflow represented 2.4 billion euros, it amounts to 3.2 billion in the third quarter of 2023. Thus, these assets under management decrease by almost 1%, from 103, 4 billion euros to 102.4 billion euros. Finally, thematic ETFs experienced a slight outflow of 100 million euros, while assets fell to 31.9 billion euros, compared to 34.8 billion euros in the second quarter.
Also read: European passive equity management shows its worst monthly outflow since October 2022
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