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Healthy inflows for European ETPs

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An overall positive mood in the equity market translated into healthy inflows for the European exchange-traded product industry for the week that ended on 15 October 2010, according to research by Deutsche Bank.



Most of the major broad European equity indices were up and EUR1.2bn of new money flowed into European exchange-traded funds.

The Euro made marginal gains against the US dollar (0.3 per cent), yet the price of gold continued its ascent and rose by 1.6 per cent. The flows into gold ETP products have been on a slowing trend over the past few weeks and this week registered a mere EUR56 million of net inflows into gold ETPs. This brought the year’s total gold flows to an impressive total of EUR4.7bn.

After a very slow summer, this week’s equity cash flows continue a solid trend indicating that European investors are returning to the equity markets. The European ETP industry saw equity inflows close to EUR1bn, a level which is at par with flows generally observed in up-trending market conditions. This week’s EUR992m equity flows follow an impressive EUR1.7bn of equity inflow from the week that finished on 8 October 2010.

Roughly half of this week’s equity flows went into emerging market benchmarks, an area that has been growing steadily since the beginning of the year. But the other half flowed into broad European equity indices. The absolute number of European equity benchmarked ETF flows is not by any means excessive, however, it does suggest that a long period of drought could be softening, the report says.

Fixed income saw inflows of EUR204m, versus EUR136m of inflows last week, a level which signals stability but no major reallocations that could conclusively point to a trend.

Commodity ETPs, whose fortunes are historically been largely dependent on the flow performance gold, had a very quiet week, registering inflows of EUR16m versus EUR179m during the previous week.

Positive cash flow sentiment transferred in the providers’ new product launch calendar. Seventeen new products were listed by six providers and 12 products were cross listed by four providers.

Fixed income had a good share of the new listings, with four new products launched by ComStage in Germany. These products track Bund futures benchmarks and primarily cover short and leveraged exposures. Together with the Lyxor products, these are tools primarily enabling duration management.

Most of the remaining new ETF launches were done by HSBC and they track a variety of equity country benchmarks. Almost all new products were launched in Germany (Deutsche Boerse) this week.

Deutsche Bank continued its commodity ETC platform expansion by cross-listing six precious metals ETCs on Borsa Italiana. Most of these products are Euro hedged, giving investors access in their native currency.

Lyxor also cross listed four equity sector ETFs on Deutsche Borse, which proved to be Europe’s most popular exchange this week, when it comes to new launches and new listings.

On-exchange daily average ETP turnover for this week was up by 4.5 per cent, to EUR1.87bn.

Average daily equity ETF turnover was up 5.5 per cent, reaching EUR1.39bn. Fixed income ETF turnover was down by 4.7 per cent, reaching EUR191m. Commodity turnover was up by 5.8 per cent, to EUR280m.

European ETP assets continued to rise, up 1.5 per cent reaching EUR210.9bn, consistent with the healthy inflows and the rise in equity prices. Most of this week AUM appreciation came from equity ETFs as they have experienced the largest proportion of inflows (81 per cent) out of every other asset class. Year to date, European ETP AUM growth is progressing nicely, and it reached 24 per cent as of the end of the current reporting week.

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