European ETF assets Head Towards $500bn

Terry Flanagan

Assets in European exchange-traded funds and products are expected to break through the $500bn barrier in the first half of next year after gathering record net inflows this year.

European ETFs had assets of $472.1bn at the end of November, just below the record of $477.4bn at the end of August this year, according to research provider ETFGI.

“We expect the European ETF/ETP industry to break through the US$500bn milestone in the first half of 2015,” said ETFGI in a statement.

The research provider said the ETF/ETP industry in Europe gathered $5.6bn in net new asset flows last month. As a result, net new asset flows are a record $61.8bn in the first 11 months of this year, overtaking the prior full-year record.

MJ Lytle, chief development officer at Source, the European ETF issuer, told Markets Media that 2008 was the last big year for European ETF flows.

“The ETF market reflects investor sentiment and the degree of flows reflects their buoyant mood on assets and expectations of performance,” added Lytle. “Developed equity markets have been up significantly and fixed income markets have not been very constructive from an interest rate or government perspective, so investors have been buying high-yield and investment-grade corporates which has been reflected in the ETF space through tactical investments.”

In Europe last month fixed income and equities ETFs each gathered net inflows of $2.8bn and commodities had net inflows of $68m.

In the US, ETF/ETP assets reached a record $1.98 trillion last month. “We expect to see assets break through the US$2 trillion milestone any day,” added ETFGI.

Globally the ETF/ETP industry also reached an all-time high of $2.76 trillion in assets and ETFGI expects that to increase to $3 trillion in the first half of next year.

In Europe this month, Source and Pimco, the US asset manager, listed two actively managed corporate bond ETFs in London which protect investors against rising interest rates.

“Source dominates the active ETF space in Europe with more than 90% of assets and recently listed two active investment grade corporate bond ETFs which are short duration,” added Lytle. “When rates increase, you’d expect spreads over treasuries to tighten as the underlying issuers recover, acting as a cushion to the headline yield (which should remain stable). This is the territory where active managers will be able to find value.”

Lytle expects the actively managed ETF segment to grow in Europe.

“We might launch 8-12 products a year if we find compelling opportunities.” he said. “The alpha and smart beta segments are underdeveloped and there is lots of room to develop interesting products while there is a limited gap in plain vanilla passive products.”

Featured image by Comugnero Silvana/Dollar Photo Club

Related articles

  1. Currency ETPs Benefit From Sterling Volatility

    Liability-Driven Investing strategies in UK pensions were affected by the Gilt market turmoil.

  2. Ethereum-based products witnessed one of their most challenging months in September.

  3. Emerging technology may enable a powerful re-imagining of active management.

  4. Year-to-date net inflows reach $712m.

  5. Clients will have the flexibility to build custom tailored workflow solutions.