European ETF flows still slowing

Net new assets in the European ETF market slowed again in May to €1.8bn from the €3.7bn we saw in April.

This was largely due to a significant decrease in fixed income ETF inflows (€0.5bn from €4.1bn).

Equity ETFs experienced some very modest outflows (€-15m).

Meanwhile, flows into commodity ETFs were very slightly positive and very similar to those we saw in April (€46m). Smart beta ETFs collected €0.4bn.

The biggest winners for May were ESG ETFs. They collected €0.9bn inflows, driven by broad strategies.

Source: Monthly data in EURM from 01/01/2019 to 31/05/2019 Bloomberg, Lyxor International Asset Management.
Note: This report is based on the data available on 31/05/2019.
Asset and flow data may be slightly adjusted as additional data becomes available.
All categories are exclusive and sum up to the total market flows.

ESG investing is having an impact

More than €897m flowed into ESG ETFs in May 2019, helping them achieve their second best month ever. They also made up just under 50% of the market’s total net inflows for May. YTD flows are already approaching the total inflows for the category we saw in 2018 (€3.6bn vs. €4.0bn). Broad ESG products gathered almost all of the inflows and, at the end of the month, accounted for around 12% of all European market flows YTD – despite only representing 2% of all assets under management (see graph below).

Source: Lyxor ETF, Bloomberg data from 01/01/2012 to 31/05/2019.

In our view, investors are more deeply integrating environmental, social, and are seeking to make a measurable, sustainable impact alongside generating a financial return. For an increasing number of investors, the two are inextricably interlinked.

For now, that integration is voluntary but it may become more systematic in time. We believe ESG ETFs will benefit from the greater general awareness of the environmental challenges we all face and the regulations that will increasingly be used to address them. Small steps have already been taken. For example, the EU’s action plan for “Financing Sustainable Growth” (released in May 2018) encourages shareholders to integrate sustainability considerations into their investment decision-making processes.