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Amundi reviews summer ETF activity

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Amundi’s summer overview of global ETFs, with data as of end August 2023, reveals that the ETF market attracted EUR95 billion in flows worldwide, with strong divergence between July and August.

In July, total inflows were EUR73.1 billion with equities adding EUR49.9 billion compared with EUR23.3 billion gained by fixed income ETFs. Large blend equity strategies were the most popular asset class gaining EUR16.8 billion reflecting investors’ appetite for US equity exposures. Investors allocated EUR5.4 billion to long government bonds ETFs whilst they withdrew EUR2.5 billion from short-term government bonds ETFs.

In August, inflows were lower with EUR21.5 billion. Fixed income was the more popular asset class gaining EUR13.9 billion compared with in-flows of only EUR4.1 billion into equities. Ultrashort bonds – which is a proxy for cash – was the most popular asset class with EUR7.5 billion in-flows, Amundi reports.

Equities

European UCITS equity ETFs added EUR13.2 billion in July and August. US equity strategies gained EUR7.7 billion, reflecting the global trend. Investors adjusted their portfolios’ allocation with the objective to increase exposure to the US as the country displayed economic resilience on the back of fiscal incentives and business investment. World indices were the second most popular strategy adding EUR4.4 billion while emerging market equity added EUR1.7 billion. This represented a break with trend seen earlier this year when investors had favoured the EM asset class.

There were limited movements in sector and smart beta ETFs with financials losing EUR0.6 billion and minimum volatility seeing withdrawals of EUR0.9 billion.

ESG equity ETFs gained EUR4.1 billion over July and August, equivalent to less than a third of total equity flows. ESG US equities ETFs were the most popular products gaining EUR3 billion, just under half the allocations to these strategies. World indices gained EUR1.5 billion, around a third of total allocations to this asset class.

Fixed Income

Continuing the trend seen in earlier months, fixed income was as popular as equities with investors adding EUR12.1 billion to this asset class. This is impressive when considering the asset base of fixed income ETFs, which is 1/3 that of equities, Amundi writes.

Government bonds were the more popular asset classes gaining EUR8.2 billion over these two months, with US dollar-denominated debt the most popular gaining EUR4.2billion over July and August. Euro- denominated debt added EUR2.5 billion. Investors appeared to be narrowing their views on this asset class overall with quite similar amount allocated to all maturities (EUR3.0 billion), long-term bonds (EUR2.9 billion) and short-term bonds (EUR2.1billion). The market seems to be divided into those who think US interest-rates have peaked and those who do not, Amundi says. In contrast, all maturity products were more popular for Euro- denominated debt.

Corporate debt was less popular this summer with investors only allocating EUR1.3 billion to this asset class with US-dollar denominated debt gaining EUR1 billion overall.

Amundi writes that this summer, ESG fixed income had in-flows of EUR1.9 billion with investors adding EUR0.7 billion to ESG government bond strategies and EUR0.6 billion to ESG corporate debt. ESG fixed income ETFs only represent 16 per cent of the total fixed income in-flows (vs 31 per cent for equity ESG ETFs). The popularity of government bonds is driving the lower allocation to ESG in fixed income as is it much more complex to integrate responsible investment principles into these assets. Product providers are, however, rising to this challenge by thinking about how sustainability can be more embedded, Amundi concludes.

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