Q4 Market Commentary on European ETFs….
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European ETFs recorded their strongest quarterly inflows in at least two years in Q4 as investor concerns about the Eurozone’s Sovereign Debt Crisis eased and the global economy showed tentative signs of recovery. Net new inflows totaled USD 11.3bn in the final quarter, reflecting a surge in demand for equity ETFs on Europe and Emerging Markets.
Consistent demand for fixed income trackers throughout the year helped underpin the 21% rise in total European ETF assets under management (AUM) in 2012 to USD 328.2bn. That compared with a 13% gain for the MSCI World Index last year.
Investors regain their appetite for risk in Europe
The Eurozone’s sovereign debt crisis entered a new phase after governments approved bailout programmes and the European Central Bank offered supplementary liquidity facilities to back up ECB President Mario Draghi’s pledge in July to do “whatever it takes” to save the euro. Funds focused on Germany and France registered outflows as investors switched into broader regional or country-specific ETFs for exposure to peripheral markets, such as Italy, that were regarded as undervalued. European-focused funds attracted the highest inflows for regional ETFs with USD 4.13bn of net new assets (NNA) in 2012.
Emerging Markets buoyed by tentative pickup in growth
Concerns about the outlook for the global economy eased, lifting demand for fixed income and equity exposure to Latin America and the Asia Pacific regions. Signs that its economy was gaining momentum made China record the largest single-country ETF inflows in 2012, with USD 1.16bn, followed by Russia and Brazil. Demand for emerging market ETFs, coupled with the increased appetite for the Eurozone, caused equity ETFs to record USD 10.4bn in NNA in Q3 and Q4 combined.
Solid demand for fixed income trackers
Consistent demand throughout last year powered a 31% increase in NNA for this asset class to USD 11.07bn, contrasting with the net outflows in 2011. Reduced risk aversion and an appetite for higher-yielding funds lay behind a rotation into emerging market and corporate debt. Sovereign debt funds regained favour with investors at the tail end of the year as Eurozone concerns receded.
ETFs get more physical
Important milestones were reached in the regulation of ETFs in Europe, clearing up key points that had attracted political and media attention in 2011 and early last year. Physically replicated funds dominated inflows, attracting NNA of USD 21.39bn in the course of 2012. Physically replicated funds account for 62% of AUM at the end of last year, almost 3 percentage points more than a year earlier.
CS ETFs Sales Strategy, Bloomberg, 31.12.2012
Source: ETFWorld.co.uk
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