Despite a challenging period for risk assets, European ETFs registered net new assets (NNA) amounting to $33.5 billion in the third quarter of 2023, marking an increase of $2.0 billion compared to the second quarter, as per the European Demand Monitor by Invesco.
The decline of 2.1% in Emea ETF assets under management (AUM) during the quarter, primarily due to market fluctuations, overshadowed an encouraging scenario for ETF flows.
The decrease in ETF assets for Q3 was mainly attributed to an average drop of 4.1% in market prices across all asset categories. Nevertheless, robust net inflows led to the total AUM concluding the quarter at $1.59 trillion, a year-to-date rise of 12.4%.
Equity ETFs were at the forefront, drawing in $21.9 billion during the quarter, equating to two-thirds of the total NNA. Fixed income ETFs also demonstrated strength this year, attracting $14.8 billion of inflows in Q3 and accumulating $50.9 billion year-to-date. However, commodity products faced $3.3 billion in net outflows during the quarter.
Interestingly, US equity and global equity ETFs were neck-and-neck in terms of inflows, with $10.3 billion and $10.0 billion of NNA, respectively, highlighting a notable resurgence in favour of US Equities. Fixed income sectors, namely government bonds (US treasuries: $4.3 billion, Euro government bonds: $4.2 billion and UK gilts: $2.2 billion) alongside Cash Management ($3.4 billion) products, were also significant contributors.
| Asset Class | AUM ($million) | Q3 NNA ($million) | YTD NNA ($million) | YTD % Market Moves[1] | |
|---|---|---|---|---|---|
| 2022 Y/E | AUM | ||||
| Total | 1,416,125 | 1,591,635 | 33,511 | 107,637 | 4.8% |
| Equity | 955,401 | 1,090,428 | 21,897 | 59,442 | 7.9% |
| Fixed Income | 338,729 | 382,521 | 14,800 | 50,875 | -2.1% |
| Commodity | 116,009 | 110,642 | -3,264 | -3,269 | -1.8% |
| [1]Source: Invesco using Bloomberg data on EMEA-domiciled products as a proxy, based on percentage change in AUM excluding the impact of NNA during the period | |||||
On the contrary, Precious Metals, predominantly Gold, experienced $3.2 billion of outflows, although broad commodity ETFs did see a silver lining with inflows of $1.3 billion.
Lastly, ESG flows, representing 30% of year-to-date NNA, currently maintain only half the market share seen in the previous year. After an uptick in flows earlier in the year, the momentum seems to have tapered off this quarter.
Gary Buxton, head of Emea ETFs at Invesco, warned the final quarter of the year has the potential to remain volatile: “Lingering uncertainty about the economic outlook and the future path of interest rates is likely to keep investors focused on large, liquid core exposures across asset classes in the near term, as they did in Q3.”
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