Eurozone crisis weighs heavily on European ETF inflows, says Credit Suisse

Aug 6th, 2012 | By | Category: ETF and Index News

Following is a roundup of the key themes from the latest market commentary (authored by Ursula Marchioni and Nicholas Low) on European ETFs from Credit Suisse (www.csetf.com).

Eurozone crisis weighs heavily on European ETF inflows, says Credit Suisse

The eurozone crisis continues to weigh heavily on European ETF inflows, according to Credit Suisse.

Total inflows into the European ETF market in the second quarter (Q2) of 2012 were $139 million – just a fraction of the $8.2 billion seen in Q2 2011, as the ongoing eurozone crisis weighed heavily on investor sentiment in the region.

Although European ETFs fared relatively better in Q2 than other investment products such as mutual funds and hedge funds, they were outperformed by the exchange-traded product (ETP) market in the US, which appears set for its best year ever as net ETP inflows for June alone were just over $21 billion.

At the end of June, the European ETF market recorded total assets of $277.34 billion, up 4.91% from $264.36 billion at the end of the previous month. This compares with a 4.93% rise in the MSCI World index over the same period. ETF inflows for June, however, were $1.6 billion – an approximate 50% fall from those seen in May.

With company balance sheets loaded with cash and default levels relatively low, investors were clearly opting for the relative security of ETFs tracking corporate bonds and emerging market debt instruments. This brought the balance of Q2 inflows into fixed income ETFs to $1.6 billion. Money market ETFs also saw a reversal of their negative flow performance in Q1, with inflows rising to $360 million, between April to June.

In contrast, equity ETFs were severely challenged, with outflows of $1.9 billion in Q2. This was largely concentrated in April and focused on redemptions in emerging market trackers, although the effects of client reallocation around the dividends season also played a significant role. Single country trackers such as Russia were net losers over the three months, although not completely offsetting a robust performance in Q1.

The pick-up in developed market global exposure to equities in the US and Europe towards the end of the quarter appeared to be linked to one of the periodic upswings in optimism over a political breakthrough in the eurozone crisis.

Investments into commodity-based ETFs were almost flat over Q2 with outflows of $13 million, compared with net inflows of $916 million in the previous quarter. Most of the outflows were concentrated in May ($773 million), and were only partially offset by inflows of $518 million in June, possibly reflecting a partial return in investor appetite for precious metal trackers.

Over Q2 and year-to-date, the overall picture for European ETF providers remains the same, with iShares, Source and Amundi recording the highest inflows, while Lyxor, db x-trackers and Comstage sustained the highest outflows.

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