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Global ETP assets up 3.5 per cent

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The global exchange-traded product market reached USD1.14trn in quarter one 2010 experiencing overall growth of 3.5 per cent, according to a report by Deutsche Bank.

Growth was fuelled by strong fixed income inflows on both sides of the Atlantic, and strong European equity inflows that kept the global growth on track despite equity outflows in the US and Asian markets.

The US ETP market grew by 3.9 per cent in Q1’10 and it is on track with Deutsche Bank’s forecast of 15 to 20 per cent growth by year end, assuming flat equity markets.

The European market continued to grow at twice the rate of the US market and experienced growth of 8.5 per cent over Q1’10. Deutsche Bank’s forecast of the European market growing at 20 to 25 per cent over 2010 remains on track, with a possibility that the growth rate could be revised upwards pending cash flow performance in Q2’10.

Despite the fact that the European market is three times smaller than the US market, it saw comparable cash flows over Q1’10.

The US ETP market experienced inflows of USD9.3bn over Q1’10. US equity ETPs experienced outflows of USD2.3bn over the quarter, while commodities finished the quarter flat and fixed income saw very strong inflows of USD11.3bn.

Extreme US equity ETP market outflows that peaked at USD23bn on 9 February 2010 reversed as equity market volatility reached record lows for the past year by quarter end (8.31 per cent on 31 March). Re-bounding US market equity ETP cash flows followed a steady trajectory suggesting they were driven by fundamentals rather than quarter-end window dressing.

US commodity ETPs emerged as the second most traded US ETP asset class after equity due to the fact that these instruments remain largely a trader’s tool, while other ETP asset classes such as fixed income are more of a buy and hold investment.

In Europe, all asset classes continued to experience inflows, totalling EUR7.5bn, throughout Q1’10, with equity and alternative cash flow trajectory remaining positively steeper than other asset classes, despite converging volatility patterns.

Overall, the global ETP market experienced a very strong product launch calendar over Q1’10, with a total of 242 new products globally (Europe 171, US 57 and Asia 14). While all asset classes saw new product launches globally, the flavour in Europe was commodities and alternatives while in the US it was emerging markets.

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