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Invesco reports European ETFs raised USD87bn of net new assets in 2022

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While the challenging market environment reduced the pace of inflows, European ETFs still raised USD87 billion of net new assets (NNA) in 2022, according to Invesco’s inaugural European Demand Monitor. The firm writes that the flows, however, were not sufficient to offset market moves, with total AUM declining by USD192 billion (11.9 per cent) to USD1.42 trillion.

A stronger year for fixed income

Equity AUM would have fallen by USD220 billion based on market moves, but this was partially offset by USD59 billion inflows for a net reduction of USD161 billion, 14.4 per cent of starting assets. Fixed income AUM, by contrast, would have fallen USD53 billion on market moves, but strong inflows of USD33 billion resulted in overall AUM reduction of just USD20 billion, or 5.7 per cent of starting assets. Commodities were the only asset class with positive returns (1.0 per cent) but outflows of USD5 billion left overall assets down by 3.1 per cent.

The rise of ESG

The increasing importance of ESG was a key theme for the year: ESG ETFs accounted for 61 per cent of NNA (USD53 billion) and now represent over 18 per cent of European ETF assets under management (AUM). 

Implications for the quarter ahead

“Having sold off heavily last year, many asset classes start 2023 with much more favourable valuations than at the start of last year”, says Gary Buxton, Head of EMEA ETFs at Invesco. “Looking ahead, we should see a more supportive backdrop for financial markets, and therefore ETF flows.

“The economic outlook is likely to maintain investor focus on large, liquid core exposures in equity markets such as world or US equities in the near term”, says Buxton. “Similarly, with fixed income yields hitting the best levels for a decade towards the end of last year, investors are likely to be able to achieve their yield targets through government and investment grade markets rather than having to take on additional risk.

“Unlike equity and fixed income returns, commodities held up relatively well last year which could put them on the back foot with investors at the start of 2023. Gold rallied into year-end and has continued to do so at the start of this year, but without the catalyst of spiking inflation or heightened geopolitical tensions, demand may be subdued in the near future.”

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