Lyxor ETF’s Money Monitor for April 2021 reveals that despite solid asset accumulation in April across equity funds and ETFs, concerns over reflationary pressures and higher government bond yields weighed further on the market momentum.
The firm found that ETFs have gathered EUR15.8 billion through April 2021, close to March’s record, with Fixed Income and Equity ETFs accumulating EUR5.0 billion and EUR10.0 billion respectively.
ESG ETFs continued their strong trend and gathered EUR5.6 billion, Lyxor ETFs says, with cumulated flow year to date standing at EUR34.1 billion more than half of the total ETF asset gathering (EUR66.0 billion).
Smart Beta ETFs gathered EUR1.5billion. Investors’ preference for Value is still very much alive, the firm says.
In terms of Fixed Income funds and ETFs, they gathered a combined EUR30.3 billion in net new assets with EUR25.3 billion into open-end funds and EUR5.0 billion into ETFs.
Equity ETFs and open-ended funds enjoyed EUR38.8 billion of net new assets, with EUR28.8 billion into funds and EUR10.0 billion into ETFs.
Vincent Denoiseux (pictured), Head of ETF Research and Solutions at Lyxor ETF, also commented on Thematic Funds and ETFs in this report, saying that they are an incredibly diverse and heterogenous asset segment, that aims addressing secular trends such as the shift in global economic power. Denoiseux writes that the economic dominance from the Western world is waning while China and other ‘developing’ economies are shifting from production-led to consumption-led economic models; developing countries are also increasingly exporting capital and innovation.
In terms of demographic and social change, Denoiseux writes that countries have different demographic trajectories; some populations are ageing rapidly if not shrinking, he says. This can limit workforce and add strains to healthcare systems. Some economies are still young and growing, creating larger labour and consumer markets.
Another theme behind thematic ETFs is the rapid urbanisation across the world. “In the 1950s, 30 per cent of the world lived in cities. Today, the figure is 55 per cent, and is expected to reach 68 per cent by 2050. Such expansion requires massive investment in smart infrastructure, he notes.
Technological breakthroughs, such as AI, automation, sensors and other frontiers of R&D are boosting productivity, Denoiseux says and new industries emerge, and old ones are reshaped; mobile technology, cloud computing,
data analytics, the internet, and machine learning will keep transforming our world, he says.
Climate change and resource scarcity will have its effect also, he says. “Global warming, extreme weather and rising sea levels put traditional methods of farming and fishing under pressure; resource scarcity is a critical issue, particularly clean water and energy; the need for sustainable solutions matters now more than ever.”
“These ‘megatrends’ cannot be qualified as investment themes per se as these concepts are neither direct nor linear,” he says. “It is our conviction that each investment solution offered on the market should tackle three key considerations: Conviction (high exposure to the theme); Diversification (to mitigate single stock risk) and Liquidity (some stocks related to these themes are small caps).
“Thematic products on offer certainly vary from one to another. However, the trend is real and clear: investors are very keen to capture the expected long-term growth from these megatrends,” Denoiseux concludes.