The European ETF industry rebounded in the second quarter, with bonds attracting 70% of new investment, according to data from Morningstar.
Overall inflows reached €33.4 billion throughout the quarter after €4.4 billion of outflows seen in the first three months of the year.
Bonds took the lion’s share of new cash, with €23.3 billion of inflows, while flows into equities totalled €4 billion.
Heavy investment into fixed income was attributed to the numerous measures put in place by central banks around the world, according to the report.
Jose Garcia-Zarate, Associate Director, Passive Strategies, said: “The second quarter was a period of solid flows for bond ETFs, with investment-grade credit at the forefront of investors’ preferences. Despite the upside to equity markets, the monthly flows data shows that investors continued to tread carefully in April and May.”
Both April and May closed with outflows for equity ETFs overall, but sentiment returned by the end of the quarter.
Investors also showed interest in ESG – or environmental, social and governance – ETFs, which drew in €6.7 billion. Equity ESG investments fared much better than their mainstream peers, the data shows.
Within Morningstar’s top five equity categories, three sector groups dominated: technology, healthcare, and industrial materials.
Garcia-Zarate added: “This signals that investors made very pointed investment decisions to fit the expectations of how the economy might respond and evolve to the unfolding Covid-19 crisis.”
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