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European ETFs raised USD47.8bn in Q1, led by equity inflows: Invesco

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European ETFs raised USD47.8 billion in Q1, a 15 per cent increase compared to the same period in 2023, according to Invesco’s latest European Demand Monitor. Overall assets under management for European ETFs hit a new high of USD1.9 trillion, buoyed by strong inflows and market-based gains of 4.9 per cent.

Equity products dominate inflows

At GBP39.6 billion, equity net new assets (NNA) were up 73 per cent compared to the USD23 billion seen in Q1 2023. Combined with a strong market performance over the quarter, this brought equity AUM to a record high of USD1.38 trillion.

Global equities remained the largest contributors to inflows in Q1 2024 with USD14.8 billion, accounting for 37 per cent of total equity flows. Inflows were stable and consistent, slowing slightly in March compared to the first two months of the year. 

US equities came a close second with USD14.6 billion of inflows, a marked contrast to the first quarter of 2023 where outflows reached USD2.2 billion by mid-March. US equity flows in Q1 2024 were equal to 46 per cent of total flows to the region seen in 2024. 

Fixed income flows remain resilient

While equity ETFs dominated NNA for Q1, the USD12.1 billion of net inflows into fixed income ETFs represents 25 per cent of market share, slightly above their market share by AUM.

With USD4.2 billion NNA, developed market government bond ETFs were the strongest category for the quarter. ETFs focusing on very short-dated US Treasuries (<1 year), however, accounted for USD2.4 billion which, when combined with cash management being the second strongest category for NNA (USD2.9 billion) over the quarter, indicates investors do not view interest rate risk as being attractive following the strong rally into the end of 2023.

A deeper dive into government bond flows, however, shows a divergence of views between US and Eurozone exposures; for US Treasuries, in addition to strong inflows into sub-one year Treasuries, there were outflows from ETFs focusing on longer maturities, indicating investors were actively shortening duration.

Commodities ETF flows

Commodities continued to experience net outflows during the quarter with net sales totalling USD2.7 billion.

Gold ETCs saw the heaviest net selling with outflows of USD2.9 billion as the gold price remained above USD2,000 per ounce for the most of the quarter, and then rallied strongly in March to hit new all-time highs, ending the quarter at USD2,230.

Other single commodity ETCs also came under pressure with net sales of USD0.6 billion. Oil ETCs were the main driver with outflows of USD1 billion, while Copper ETCs saw inflows of USD0.3 billion. 

Outlook for Q1 2024

“We expect equity performance to continue to depend on the evolution of growth, inflation and interest rates”, says Gary Buxton, Head of EMEA ETFs at Invesco. “A bumpier landing is likely to favour perceived safe-haven exposure such as global or US, a softer landing may help support appetite for more cyclical markets. Questions over concentration in markets are also likely to persist.”

“On the fixed income front, yields across many bond markets currently look close to the best levels seen in 15 years and the more dovish rate outlook, fixed income is primed to perform well for the rest of the year, which should drive further inflows.”

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