European ETF market rebounded strongly in Q2, says Morningstar

The European exchange-traded funds market rebounded strongly in the second quarter of the year with net inflows of EUR33.4 billion, compared with EUR4.4 billion of outflows in Q1.

That's according to the latest Morningstar Direct European ETF Asset Flows Update which reveals that assets rebounded to EUR903 billion from EUR780 billion in the first quarter.

Investors strongly favoured fixed income, which attracted 70 per cent of the quarterly flows, while ESG ETFs gathered EUR 6.7 billion, with equity ESG investments doing much better overall than mainstream peers.

iShares topped the ETF providers league table with EUR19.4 billion of inflows thanks to its dominance of the fixed income ETF segment in Europe.

Jose Garcia-Zarate, Associate Director, Passive Strategies, says: “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 months closed with mild outflows for equity ETFs overall, although there is evidence that investors took positions in ESG-themed equity funds during the period. 

"In terms of Morningstar Categories, within the top five equity categories we find three sector groups— technology, healthcare, and industrial materials. 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.”