Assets under management (AUM) in the global passive ETF market have shrunk by 7.1% during the second quarter of 2022 as investment performance has taken its toll, according to index group Qontigo.
The fall is the biggest quarter-on-quarter decline since the first quarter of 2020, according to its latest quarterly ETF insight report.
The fall in assets was due to a negative investment return of -8.3%, which offset net inflows into the market during the quarter of more than €92bn.
Despite the decline in investment return, most passive ETF product segments attracted new capital in Q2.
ESG strategies recorded net inflows of €8bn during the quarter and fared better than other segments in terms of price performance, registering a loss of –6.2%.
So-called ‘deep green’ Article 9 ETFs proved popular in the EMEA region during Q2 with AUM growth of 37%, largely driven by ETFs switching to become compliant with the SFDR article classification, while ‘light green’ Article 8 products saw AUM fall by 11%.
Unclassified, Article 6 ETFs saw a decline in AUM of almost 60%, leaving only a few ESG products in the EMEA region that aren’t compliant with either Article 8 or 9, according to Qontigo.
However, thematic ETFs, which grew rapidly in 2021, faced the worst of the selling with a fall in AUM of 21%.
Technology themes such as crypto, cloud computing and robotics and automation drove this fall in AUM.
Axel Lomholt, chief product officer (Indices & Benchmarks) at Qontigo, said: “In one of the most challenging quarters in recent history, the passive ETF market held its ground, with most segments we track registering net inflows.
“EMEA asset managers continue to re-purpose funds ahead of what’s expected to be a new tide of demand for ‘green’ funds that are compliant with SFDR rules. ETFs in the region need ot have some ESG filter to be attractive to a wider audience.”
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