After registering dynamic growth in the first half of the year, demand for Europe-listed ETFs slowed considerably in August, according to Morningstar’s monthly ETF asset flows analysis. Inflows of €3.5 billion marked the lowest one-month period since September 2016, as AUM within the European ETF industry increased slightly from €613bn to €615bn during August 2017.
US large-cap ETFs saw the greatest inflows while energy ETPs saw the largest outflows during the month.
US large-cap blend ETFs enjoyed the highest inflows in August with €804 million, a rare feature in a year where European equity funds have dominated sales.
Financial services equity sector ETFs gathered the second largest inflows with €410 during the month. Ali Masarwah, EMEA editorial director, Morningstar, commented: “Equity ETFs tracking the financial services sector continued to see above-average inflows in August after taking in record subscriptions in July. The continuing demand for these highly cyclical assets indicates investors remain confident about the growth prospects for the eurozone economy.”
The next highest level of inflows went to global emerging markets ETFs, which added €392m during the month, although Masarwah points out this is lower than recent months. The Amundi ETF MSCI Emerging Markets UCITS ETF (LON: AUEM) was the main driver of inflows in this category, raking in €373m.
Commodity ETPs suffered the highest outflows by category in August. Net redemptions were the second highest on record in a one-month period after December 2016, with much of the pain being borne by energy ETPs which saw outflows of €237m during August.
Eurozone large-cap equities suffered the next highest outflows during August, losing €223m in assets, the first month of outflows since October 2016.
Breaking down the flows by ETF provider, iShares gathered the largest share during the month with €2bn, followed by BNP Paribas (€390m), UBS (€373m) and Vanguard (€344m). August was also a positive month of flows for State Street, Pimco and Source, as well as smaller providers including OSSIAM, Boost and Think ETFs.
ETF Securities recorded €141m in net outflows, largely caused by flows from Brent and WTI crude ETPs. Deutsche Asset Management saw the next highest outflows with €80m in net assets withdrawn from the firm’s suite, although it lost €540m from the db x-trackers MSCI World Index UCITS ETF (LON: XMWD) alone.
During August, strategic-beta ETFs witnessed outflows from both of the two main strands of the alternatively weighted products, risk-orientated and return-orientated.
Masarwah commented: “The past year has been challenging for the providers of low-volatility and minimum-variance ETFs. After a bout of marked underperformance of these low-beta equity products caught many investors wrong-footed in the fall of 2016, outflows have dominated the scene. Risk-oriented ETFs lost 27.4% of their assets in the past 12 months.”
Return-orientated strategic beta ETFs fared better during 2017 – according to the report, these funds added €5.2bn in net new assets so far this year, although August brought outflows of €42m. Masarwah added: “In the wake of the (short-lived) cyclical rally in the second half of 2016, these products had seen strong inflows to date, but this August was the first net-flow negative month since September 2016.”
Breaking down the flows by individual ETFs, the largest gainer during August was the iShares Core S&P 500 UCITS ETF (LON: CSPX), the largest Europe-domiciled ETF, which added€393m during the month. The next largest gains in net new assets were the previously mentioned Amundi ETF MSCI Emerging Markets UCITS ETF and the iShares Core Dax UCITS ETF (Xetra: DAXEX), which added €373m and €346m respectively.
The ETFs that experienced the largest outflows during August were the previously mentioned db x-trackers MSCI World Index UCITS ETF, which lost €520m, followed by the Amundi ETF JPX-Nikkei 400 UCITS ETF (LON: JPNY) and the iShares EURO STOXX 50 (LON: CSX5), which saw outflows of €388m and €352m respectively.