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After a slowdown in April, European ETF market flows were back on track in May.

Net New Assets (NNA) during the month amounted to EUR9.5bn, a level comparable to the first months of the year. Total Assets under Management are up 12% vs. the end of 2016, reaching EUR579bn, and including a positive market impact of 3%. Emerging Market and European equities benefited from a more risk on environment.

Equity ETFs recorded strong inflows at EUR6.5bn. Political risk has receded considerably in Europe and the growth pulse has improved. In this context, European equity ETFs gathered EUR3.5bn of NNA. After substantial outflows the previous month, US equity ETFs gathered EUR116M of NNA, with macro news flow suggesting a pick up in US growth. Significant inflows into global ETFs at EUR1.2bn continued to reflect increased optimism in a supportive economic environment. Asia Pacific equity ETFs kept recording strong inflows at EUR327M. Emerging Market equities ETFs also recorded much higher inflows this month, at EUR1.4bn. China proved to be resilient despite the tightening of local liquidity conditions. Once again, these flows were almost exclusively focused on broad emerging markets equity ETFs.

Smart Beta ETFs confirmed their positive trend, gathering EUR783M of NNA. Income generating ETF flows halted with -EUR88M of outflows, whereas Value ETFs were back in positive territory with substantial inflows of EUR803M.

Fixed income ETF inflows amounted to EUR2.9bn, in line with the start of the year. They were largely focused on Corporate Bonds, with inflows at EUR 1.8bn, as issuance surged substantially in May. Emerging debt ETFs kept gathering high inflows as the search for yield continued, with EUR1.0bn of NNA. This also fueled positive flows into high yield ETFs at EUR420M. European govies ETFs experienced another trend reversal with –EUR35M of outflows.

Inflation-linked ETFs saw more outflows as the sentiment on inflation has tapered out for now.

Commodities flows pulled back at EUR76M and were divided between broad exposures and precious metals.

Lyxor Research , June 2017

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