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Bond ETFs see tepid demand in July

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European Exchange Traded Funds enjoyed net inflows of EUR7.8 billion in July 2017, bringing this year’s tally to EUR65.2 billion. Assets under management of Europe-domiciled passive products hit a new record high of EUR613 billion. Bond fund ETFs, however, saw tepid demand pulling in net EUR1.56 billion, the second lowest one-month inflow this year.

That’s according to Morningstar’s ETF Fund Flow report for July 2017, which also reveals that outflows from Euro high-yield ETFs, and a much-reduced demand for USD corporate bond and global emerging market bond ETFs, were clear signs of ETF bond investors risk-aware behaviour. Conversely, equity ETFs enjoyed solid inflows of EUR4.88 EURbillion, and commodity exchange-traded products rebounded in July.
 
In addition, European investors channelled EUR1.35 billion into eurozone large-cap equity products, while German large-cap Equity ETFs, mainly DAX trackers, enjoyed net inflows of EUR539 million, the highest level in a one-month period since December 2015.
 
iShares topped the asset flows by-provider, drawing in net flows of EUR3.54 billion; Equity ETFs saw inflows of EUR2.41 billion and bond ETFs EUR850 million, well below the monthly levels seen so far this year.
 
Source saw the highest outflows in July on the back of outflows from broad basket commodity ETFs, which witnessed outflows of EUR510 million, while Swiss-domiciled UBS ETF (CH) Gold was the most popular ETF in Europe in July; the fund is distributed only in Switzerland and achieved net EUR660 million in inflows in July.
 
Ali Masarwah, EMEA Editorial Director for Morningstar, says: “European investors displayed confidence in the Eurozone’s recovery in July. Most of the net new money targeted plain vanilla Euro Stoxx 50 trackers with iShares enjoying the highest flows. The positive sentiment towards Eurozone is also reflected by the record inflows sent to financials ETFs, most of which track eurozone banks barometers.”

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