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ETF investors sell equities in favour of fixed income and gold

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Risky assets had a rough month in September, with mainstream European and US equity indices declining upwards of 5%, according to Deutsche Bank’s ETF Market Monthly Monitor. This topped off an overall negative quarter, where most major European equity indices lost close to a fifth of their value.

During the month, the European ETF industry netted net outflows of EUR152 million, a number that on the surface appears flat. However, the month was anything but flat. Equities experienced outflows totalling close to EUR1 billion, while defensive assets, such as fixed income, netted inflows of EUR603 million. The European ETF market also experienced equity outflows in the prior month, August, totalling EUR1.4 billion.

European fixed income ETFs gathered EUR603 million in September and EUR476 million in August. Fixed income inflows were primarily driven by sovereign inflows, both in August 1 On exchange turnover, excludes over the counter turnover figures as they are not currently consistently reported across Europe. 2 Cash equities turnover represents total on-exchange euro value of all traded security types in Europe, as reported by Bloomberg.

European commodity ETPs had an overall relatively quiet month, registering total inflows of EUR105 million. However, beneath the surface, gold experienced inflows of EUR423 million, which were largely offset by outflows from ETPs benchmarked to diversified commodity indices [-EUR342 million].

The US ETF market presented a very similar picture on the equity side; however, fixed income ETFs continued to attract strong flows. The US ETF market experienced net inflows of USD4.7 billion in September, a trend that largely reflected August flow activity [USD3.8 billion]. Equity ETFs experienced outflows of USD656 million in September, following equity outflows of USD519 million in August. While these outflows do not represent a strong trend, they do indicate continued negative pressure on the equity market.

US fixed income ETFs amassed an impressive USD5.8 billion of inflows in September, following USD4.4 billion of inflows in August. Fixed income flows kept the US ETF industry in positive territory over the past couple of months. US commodity ETPs continued to experience outflows in September, totalling USD234 million, following outflows of USD1.1 billion in August. US commodity outflows were primarily driven by gold ETP outflows.

Retraction from equity emerging market benchmarked ETFs totalling EUR1.2 billion

The largest source of European equity outflows came from ETFs tracking emerging markets, totalling EUR1.2 billion. ETFs benchmarked to global emerging market indices, such as MSCI EM, experienced outflows of EUR512 million, while BRIC and Asia benchmarked ETFs lost EUR261 million and EUR284 million respectively.

The second strongest European ETF market equity investment trend, totalling EUR600 million, was registered by ETFs benchmarked to developed market indices. Germany (EUR364 million), Japan (EUR294 million), UK (EUR190 million) and Switzerland (EUR154 million) experienced the month’s strongest inflows. However, these inflows were diminished by outflows from European broad indices (EUR401 million). Year to date, German (EUR11.1 billion) and US (EUR3.2 billion) benchmarked equity ETFs make up for the vast majority of the year’s equity inflows (EUR15.4 billion).

Sector, capitalisation and style ETFs experienced cash flows of EUR167 million, EUR361 million and EUR139 million respectively for the month of September. Strategy ETFs experienced overall inflows of EUR279 million, primarily driven by short (EUR166 million) and leveraged short (EUR115 million) ETFs.

 

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