Invesco’s latest European ETF Snapshot shows investors added USD111 billion of net new assets (NNA) to EMEA ETFs across July and August, with strong corporate earnings helping markets overcome concerns around the US-Iran conflict, US debt and the interest-rate outlook.
The firm writes that equities captured 72 per cent of flows, with 20 per cent going into fixed income and 8 per cent into commodities, primarily gold.
Three themes stand out, the firm says:
1. Equity leadership broadens beyond AI and mega-cap tech
Equity ETFs attracted USD80 billion across July and August, led by US equities (USD16.0 billion), All-World (USD14.2 billion) and Developed World (USD13.2 billion).
Beneath the headline flows, investors continued looking for broader exposure. Equity Yield strategies attracted USD4.4 billion, while Equal Weight ETFs took in USD3.6 billion as investors sought to reduce concentration risk or take a more balanced approach.
Invesco writes: “The AI narrative is not breaking, but it is changing. Technology may not lead from here, given stretched momentum and growing monetisation questions, and investors are shifting from who can spend most on AI to who earns an adequate return on it. Concentration remains a consideration for investors assessing portfolio exposures, even where mega-cap leadership is justified by fundamentals.”
2. Debasement trades are back, with gold the clearest beneficiary
Physical Gold ETCs attracted USD9.1 billion across July and August, with flows accelerating sharply in August. The month alone saw USD7.6 billion of NNA – 76 per cent of gold’s total year-to-date inflows.
Invesco argues gold has been the clearest beneficiary of concerns around fiscal dominance and market intervention. While higher yields would ordinarily support the dollar, greater intervention could instead put pressure on the currency, strengthening the case for so-called “debasement trades”.
The Snapshot also points to continued central bank demand for physical gold and its historical role as a portfolio diversifier when concerns rise around fiscal discipline, currency credibility and policymakers’ ability to suppress yields.
3. Intervention can’t stem the tide: reducing duration risk with CLOs
Fixed income ETFs attracted USD22 billion over the two months, but investors remained wary of duration risk. Defensive exposures in demand included EUR cash management ETFs, which drew another USD4.6 billion, while US Treasury ETFs attracted USD3.0 billion.
Against that backdrop, Invesco highlights AAA CLOs as one way investors can reduce duration risk. “Their underlying floating-rate senior secured loans make them less sensitive to government bond yields, while the highest-rated tranches can complement short-duration income portfolios or diversify broader fixed income allocations,” the firm says.
