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European ETP market finishes week flat

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While volatility persisted across equity markets, major indices recovered roughly half the losses suffered in the prior week with Euro Stoxx 50, iBoxx Euro Sovereign 3-5 Year and Gold (USD) all rising by 5.4 per cent, 2.8 per cent and 2.1 per cent respectively, according to Deutsche Bank.

Despite overall rising market performance, the European exchange-traded products market finished the week flat, with assets under management declining 0.1 per cent.

The lack of steam in asset growth is primarily attributable to equity ETF outflows. More specifically, it has largely been driven by three substantial outflows from ETFs that offer exposure to the German DAX index dividends. The iShares DAX (DE), the iShares DivDAX (DE) and the ETFlab DAX ETFs lost a collective of EUR8.7bn, or EUR5.4bn, EUR2.6bn and EUR742m respectively.

These are the same three ETFs that experienced similarly large inflows last week (EUR6.0bn, EUR2.5bn, EUR1.3bn). While those inflows helped the European ETP market finish the week with positive AUM growth despite strong negative equity market performance last week, this week’s outflows have significantly contributed to overall negative ETP market flows of EUR6.6bn.

Adjusting for these three large outflows, the European ETP market saw overall inflows of EUR2.1bn, primarily attributable to fixed income and commodities.

The Div DAX flows are likely directed by a few decision makers, a conclusion that can be drawn when looking at their size and the fact that they have occurred over a narrow time frame, the report says. These are unlikely to be individual investors, as their size points to flows directed by financial institutions.

New product launch activity picked up this week with seven new products launched, including four by Deutsche Bank and three by Lyxor. While the number of new launches was by no means extraordinary, it is worth noting that new launches include US and UK sovereign short (exposure, not duration) and Asian fixed income indices as well as real estate indices.

Gold (EUR602.8bn) and sovereign fixed income (EUR367.9m) inflows account for the majority (71 per cent) of inflows in fixed income and commodities, two asset classes that enjoyed the strongest interest during this week.

Equity ETP inflows over the week, outside the three DAX dividend funds, remained very subdued with the maximum single fund daily inflow of EUR281m.

Average daily (on-exchange) turnover increased among all major asset classes and reached nearly EUR3bn average per day, a new high, up 13.3 per cent from last week. This increase follows an all-time high of EUR2.5bn last week.

Equity ETPs remain by far the most traded asset class, with a daily average (on-exchange) turnover of EUR2.3bn representing a 13 per cent increase from last week.

Fixed Income average daily (on-exchange) turnover was led by sovereigns (EUR169m) and money market (EUR55m), both of which experienced rises of six per cent and 13 per cent respectively from the prior week.

Commodities saw the largest average daily (on-exchange) turnover, reaching EUR321m, up 19 per cent from last week. Gold leads turnover activity, with average daily (on-exchange) turnover of EUR171m, followed by broad commodity indices, EUR27m, and crude oil, EUR26m.

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