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ETFs listed in Europe experienced net inflows in March of €9.8 billion, leading to a record-breaking quarterly result of over €30bn for Q1 2017, according to Lyxor, Europe’s third largest provider of ETFs. As of the quarter’s end, total assets under management are up approximately 10% compared to the end of 2016, reaching €566bn, including a positive market impact of 4%.
Flows into both developed and emerging market equity and fixed income ETFs were positive for March as investors sought risk-on exposures.
Equity ETFs recorded the strongest inflows during the month, amounting to €6.3bn – US and European exposure ETFs led the pack with €2.3bn and €2.2bn of net new assets respectively. Significant inflows into global developed equity ETFs (€793 million) also reflected increased optimism at the global macroeconomic level, according to Marlène Hassine Konqui, head of ETF Research at Lyxor.
On the other hand, Asia Pacific equity ETFs saw outflows of €494m after reaching a one-year record high last month as the BoJ maintained its interest rate curve control policy.
On the emerging markets side, Lyxor writes that flows continued to be positive with net gatherings of €1.1bn as the Fed maintained a rather dovish tone despite increasing interest rates. Within the EM category, flows were mainly concentrated on broad equity ETFs.
Smart beta ETFs experienced a strong trend reversal with outflows of €108m. Flows into Quality ETFs increased slightly at €93m while flows into Value ETFs (including style + factor value) turned slightly negative at -€49m, following five months of strong inflows.
Fixed income ETF inflows were sustained at €2.9bn with a focus on emerging debt and investment grade corporate bond ETFs. European govies saw outflows which Lyxor ascribes to a volatile rate environment. Flows into emerging debt were once again positive at €1.2bn as the search for yield continued yet high yield ETFs saw outflows of €406m as investors responded to stretched valuations.
Investment grade corporate bond ETF flows reached €1.9bn, an 11-month record high. Approximately 40% of those flows went to short duration or floating rate bond ETFs in a move to reduce interest rate sensitivity ahead of the Fed’s widely-expected rate hike. Flows into inflation-linked ETFs slowed down at €148m compared to €948m in February.
Commodities ETF flows were rather significant at €523m vs. €209m in February, and were mainly on broad commodity ETFs.