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Net inflows into ETPs reach EUR41bn

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Over the past 12 months net flows into European exchange-traded products have remained strong with inflows of EUR41.2bn, bringing total assets under management close to EUR137bn, accord

Over the past 12 months net flows into European exchange-traded products have remained strong with inflows of EUR41.2bn, bringing total assets under management close to EUR137bn, according to a report by iShares.

Overall assets under management have risen by 28 per cent over the past year.

The area with the highest flows during this period has been regional ETFs with EUR11.4bn of new assets. This represents close to 27.6 per cent of all flows and is very much in keeping with their market share in terms of AUM.

Regional ETFs is a category dominated by broad regional equity benchmarks, and within this category there has been a shift away from pure Euro-land flows into pan-European ETFs and global benchmarks such as MSCI Emerging World and the Developed market index.

On a year to date basis, regional ETFs have gathered close to EUR3.2bn of net new assets which is less than 17 per cent of the total. Trends in the most recent month have been more positive with flows at close to EUR1bn representing over 31 per cent of all new ETF flows.

The next most significant area of new asset flows over the past year has been in country ETFs which have achieved flows of EUR6.6bn which is just over 16 per cent of the total. The largest flows over the past year have been into UK equity ETFs and these have accounted for 40 per cent of country flows. In 2009, country ETFs have had below average flows with net asset flows of EUR1.4bn representing only 7.5 per cent of total market flows.

According to iShares, fixed income has been an important area of in flows over the past year with net new assets of EUR6.6bn representing close to 16 per cent of all flows.

Whilst there have been particularly strong flows into short-term government, corporate and inflation linked products, there have been significant outflows from money market ETFs. In the past month alone these have exceeded over EUR1bn leaving money market ETFs at close to 21 per cent of fixed income AUM, a sharp decrease from over 24.2 per cent the previous month.

Commodity ETFs and ETPs have been particularly strong in terms of new asset flows with over EUR6.44bn during the most recent 12 month period, representing 15.6 per cent of asset gathering. The report says this trend is even more significant if one considers flows in the current year when commodity products have gathered over EUR6.43bn of assets, equivalent to almost 34 per cent of all flows into European ETPs. Data shows that 73 per cent of all asset growth has been in precious metals, and this is predominantly gold, whilst there have been equal levels of asset gathering in energy and broad diversified commodity products.

World country ETFs, which consists of both developed and emerging markets, have gathered over EUR5bn of assets over the past year. Developed country asset flows were just over EUR3bn, and within this flows into the US market accounted for 85 per cent of the total. Emerging market countries gathered just over EUR2bn of assets and this was dominated by flows into China and Brazil which made up around 56 per cent of all flows.

In other parts of the ETP market there were interesting trends in sector products. Over the past 12 months banks sector ETFs have added close to EUR370m of assets whilst basic resources have added over EUR335m in assets. Overall total sector flows have been in excess of EUR2.3bn, which is over 5.6 per cent of all flows and is broadly in line with sector ETFs as a proportion of all ETFs.

Non-delta one products, such as short and leveraged ETFs, gathered a relatively modest EUR1.7bn of assets, whilst the most recent data shows outflows from leverage products although still positive flows into short products.

Nizam Hamid, head of sales strategy, iShares Europe, says: ‘This report shows demand for exchange-traded products continues to grow particularly as investors look to transparent and highly liquid products with which to invest.

"The key findings have been the strength of flows into regional products which reflects investors’ demand for broader based indices, and increased flows into emerging market ETPs, which reveals their confidence in enhanced recovery prospects for emerging market economies.

‘Commodities, especially in the current year, have been an important area of investor interest and can, in part, be viewed as a continuation of the trend to invest in products that provide a hedge against inflationary pressure.

‘Fixed income funds – where there has been a flurry of product launches over the past 12 months – have also experienced significant positive inflows in the period, despite the outflows from money market related ETFs. This demand shows how investors value ETFs by helping to create a more balanced risk managed portfolio.’

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