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October sees strong cash flows into European ETFs

Global exchange-traded fund industry assets were flat in October and closed the month at USD1.59trn, taking their year-to-date return to 22 per cent.

The European ETF industry ended the month at EUR242.3bn (YTD +16.85 per cent), according to Deutsche Bank.

Global cash flows took a pause with monthly flows of USD10.7bn in October as compared to USD39.3bn recorded in September. Market activity in Europe declined in October, with ETF turnover levels registering a 6.9 per cent drop over September levels.

US domiciled ETFs put up a weak show in October with monthly cash flows totalling a very modest USD1.4bn. This represents the lowest monthly cash flows in 2012 for US domiciled ETFs.

Fixed income ETFs registered cash inflows of USD5.5bn while commodity ETVs collected USD1.8bn over the same period. Equity ETFs witnessed cash outflows of USD4.2bn which is in sharp contrast to the USD31.1bn of cash flows received during the month of the September.

Notwithstanding the outflows in October, equities continue to remain the top asset class for YTD cash flows with USD74.6bn, trailed by fixed income ETFs and commodity ETVs with USD51bn and USD9.4bn, respectively.

ETFs domiciled in Asia received cash flows of USD5.6bn in October, second only to those received in May which totalled USD13.4bn. A large part (USD2.3bn) of the October accrued to a single ETF which is listed on Shenzhen Stock Exchange and tracks Chinese equities.

New product issuances also brought in cash flows of close to USD1bn in October. Asia domiciled products have attracted close to USD30bn in YTD cash flows, making 2012 one of the strongest years in terms of cash flows.

October has emerged as the strongest cash flow month in 2012 for Europe domiciled ETFs, which attracted close to EUR2.9bn in new money in the month. Equity ETFs, fixed income ETFs and commodity ETPs received EUR1.3bn, EUR1.4bn and EUR1bn in monthly cash flows, respectively. Fixed income ETFs had a very good month as compared to September where monthly cash flows totalled a very modest EUR242m.

Among European ETPs, equities have the lions’ share of assets (60 per cent), followed by commodities (20 per cent) and fixed income (19 per cent). However, YTD cash flows into the three major asset classes have been comparable, ranging between EUR6.3bn to EUR6.5bn.

The European ETF industry has achieved a growth of 16.8 per cent (EUR terms) in 2012 as of the end of October. Although this is less than what the industry has exhibited over comparable periods in the past, this may still be interpreted positively given the difficult markets conditions and the weak economic outlook which have persisted in the region through most of the year.

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