Assets invested in Exchange Traded Funds (ETFs)and Exchange Traded Products (ETPs) listed in Europe reached a new all-time high of $389 billion at the end of January 2013. ETF and ETP assets have increased by 5.3% from $369 billion to $389 billion during January, according to figures from ETFGI’s monthly European ETF and ETP industry insights.
Market performance contributed to the increase in the value of assets held in ETFs and ETPs as 18 of the top 20 markets globally showed gains in January. Two of the markets with strong gains were the US and the UK where history has shown that a strong January tends to be a good predictor for the rest of the year. A review of history in both markets shows that strong January performance is typically followed by positive returns in the subsequent 11 months.
The FTSE 100 index was up 6.5% in January which ranks as the best start to the year since 1989. According to FTSE, 14 of the 17 Januaries with positive performance since 1984 (when the index was launched) were followed by 11 months of positive returns.
Overall there were $6.7 billion of net new assets allocated to ETFs and ETPs in January, an increase on the $5.5 billion in December 2012 and almost double the $3.4 billion of net inflows in January 2012.
$5.4 billion of net new assets were invested into equity ETFs and ETPs in January. This is a continuation of the trend started in December when $4.2 billion of net new assets were allocated to equity ETFs and ETPs. January’s net inflows were distributed across four regions: ETFs and ETPs providing exposure to North American equities gathered $1.5 billion, $1.2 billion net inflows went into emerging market exposure, European equities gathered $1.1 billion and Asia Pacific equities saw net inflows of $1.0 billion.
“The flows into the equities show investors risk appetite is increasing as investors are feeling more confident as global economic concerns over corporate earnings, US debt ceiling, US housing market, US job outlook and the outlook for the Eurozone seem to be improving. There are signs of a rotation out of fixed income into equities,” according to Deborah Fuhr, Managing Partner at ETFGI.
Fixed Income ETFs and ETPs gathered $1.1 billion, with $415 million going into Government bond exposure, $391 million into high yield, $361 million into emerging market bonds and$301 million into corporate bonds, while money market and mortgage-backed products experienced net outflows of $355 million and $100 million respectively.
Commodity ETFs and ETPs saw net inflows of $203 million. Agricultural ETFs and ETPs gathered $183 million, industrial metals accumulated $129 million and broad commodity ETFs and ETPs saw net inflows of $77 million, while ETFs and ETPs providing exposure to precious metals experienced net outflows of $111 million and energy ETFs and ETPs saw net outflows of $73 million.
“A growing number of institutional investors, financial advisors and retail investors are embracing the use of ETFs and ETPs for strategic and tactical asset allocations. ETFs provide greater transparency in relation to costs, portfolio holdings, price, liquidity, product structure, risk and return compared to many other investment products and mutual funds.” according to Deborah Fuhr, Managing Partner at ETFGI.
At the end of January there were 1,969 ETFs and ETPs, with 6,220 listings, assets of $389 billion, from 46 providers on 23 exchanges. iShares gathered the largest net ETF/ETP inflows in January with $3.8 billion, followed by UBS GAM with $842 million and Amundi ETF with $716 million net inflows. Credit Suisse AM experienced the largest net ETF/ETP outflows in January with $198 million, followed by ZKB with $148 million and RBS with $91 million net outflows.
iShares is the largest ETF/ETP provider in terms of assets with $148 billion, reflecting 38.2% market share; db x-trackers/db ETC is second with $53 billion and 13.7% market share, followed by Lyxor AM with $41 billion and 10.6% market share. The top three ETF/ETP providers, out of 46, account for 62.4% of European ETF/ETP assets, while the remaining 43 providers each have less than 7% market share.
STOXX has the largest amount of ETF/ETP assets tracking its benchmarks with $97 billion, reflecting 25.0% market share; MSCI is second with $81 billion and 20.9% market share, followed by S&P Dow Jones with $34 billion and 8.8% market share.
ETF/ETP average daily trading volumes increased by 21.8% from $3.1 billion in December 2012 to $3.7 billion in January 2013.