Monthly European ETF Market Trends - August 2016 in brief

European ETF Market flows slowed in August 2016. NET NEW ASSETS (NNA) during this month amounted to EUR4.7bn, still 21% above the one-year monthly average level. Total Assets under Management are up 7% vs. the end of 2015, reaching EUR481bn, including a slight rise in the market (+3.9%*). Emerging Market and investment grade corporate bond ETFs gathered most in this environment of heightened uncertainty.

• Equity ETF inflows were significant at EUR2.1bn, continuing the trend of the last two months. On developed markets, flows were limited at EUR339M. Positive news in the US economic data helped sustain strong inflows of EUR1.2bn. However, in Europe the less positive economic data prompted outflows of EUR1.1bn from European ETFs. Emerging Market equity ETFs continued their rebound with inflows of EUR1.5bn. Flows were focused on broad index exposures, which would suggest that investors were taking a tactical position ahead of the FED’s decision on rates. Smart Beta ETF flows lost momentum, gaining just EUR435M in new assets after hitting a one-year record high in July. This month, Smart Beta investors favoured dividend and factor allocation products over minimum variance ETFs in their search for yield and alternative sources of return.

• Fixed income ETF inflows almost halved in August to EUR2.7bn compared to July, close to their one-year monthly average. On developed countries, flows were mainly focused towards investment grade corporate bond ETFs, which saw EUR1.4bn of new assets following sustained ECB action. Emerging Market Debt continued to see some inflows of EUR833M although at a slower pace than the one-year record high reached in July of EUR2bn, which was fuelled by the very low/zero interest rate environment and investors’ hunt for yield. The rebound in High yield Bond ETFs of July was short lived with EUR62M of outflows in August. Interestingly, flows on inflation-linked ETFs reached a one-year record high with inflows of EUR546M. Flows here were mainly on US exposures as economic growth seems to accelerate.

• Commodity ETF flows halted with EUR76M of outflows, which compares to the oneyear record high of EUR1.1bn reached in July.