Europe’s ETF industry sees first outflows since Covid crash

ETFs listed in Europe recorded their first monthly net outflows in July since markets were roiled by Covid-19 in March 2020.

Europe’s ETF industry sees first outflows since Covid crash

Europe’s ETF industry experienced a rare month of net outflows in July.

According to the Refinitiv Lipper: European ETF Market Report – July 2022, Europe’s ETF industry saw minor net redemptions of approximately €400 million over the course of the month, far below the rolling 12-month average of €9.3 billion net inflows.

Despite the net outflows, total assets in Europe-listed ETFs rose in July as strong market performance helped push AUM up by €90.3bn to a total of €1,317.2bn at month’s end.

The report notes that July’s outflows “occurred in a positive and volatile market environment in which investor sentiment was impacted by high inflation rates, increasing interest rates, geopolitical tensions, and disrupted delivery chains caused by the still ongoing Covid-19 pandemic in Europe and other parts of the world.”

Fixed income ETFs were strongly in demand during July with total net inflows of €4.6bn as lower bond prices and higher yields brought investors back to the segment. Government, corporate, and high-yield bond ETFs all saw inflows during the month. According to the report, the best-selling categories were USD government bonds (+€2.0bn) followed by EMU government bonds (+€1.0bn) and EUR bonds (+€0.9bn).

Mixed-asset ETFs also recorded minor net inflows of €0.02bn, however, all other asset classes saw net redemptions with particular outflows from equity ETFs (-€1.7bn) and commodities ETFs (-€2.9bn).

July marked the third consecutive month of outflows for commodities ETFs with investors wary about the possibility of a global recession having a negative impact on the segment. This was despite the ongoing war in Ukraine offering the potential for rapid price swings in supplies and prices.

The report notes that equity ETFs still make up the vast majority of Europe’s ETF industry with a total AUM of €950.1bn (72.1%), followed by fixed income ETFs at €317.9bn (24.1%), commodities ETFs at €35.4bn (2.7%), and alternative ETFs at €6.3bn (0.5%).