Emerging Market ETPs See First Inflows Since January
European markets were up for a second week in a row. The FTSE 100 increased +1.32%, the FTSE 250 was up +0.73%, whilst the Stoxx Europe 600 saw an increase of +1.34%. The DAX was also up for the week with a positive return of +1.79%.
U.S. equities were up +0.69% and the CSI 300 was flat at +0.01% for the same period.
The CBOE Volatility Index dropped -0.72% from the previous week closing at 22.05 points.
WTI Crude oil closed last week at $42.01 a barrel, with an increase of +1.92%.
For the second time this year, Invesco has reduced the fees on its gold ETC, the $13.7bn Invesco Physical Gold ETC (SGLD), by four basis points to 0.15%. As highlighted in last week’s report, the $4.1bn Amundi Physical Gold ETC (GOLD) and the $15.4bn iShares Physical Gold ETC (IGLN) also have an annual TER of 0.15%.
Since February, SGLD has seen over $6bn inflows as investors have poured record assets into gold ETCs. According to analysis from Invesco, gold exchange-traded products listed in Europe raised more than $10bn of net new assets in 2020 to the end of July, with $1.4bn of inflows during the final month alone. Source: ETF Stream
WisdomTree has migrated 62 UCITS ETFs to the International Central Securities Depositary model ahead of the Brexit deadline. Euroclear Bank and Clearstream Banking Luxembourg will act as the primary CSD’s for the settlement model going forward.
The key advantage of the transition is ensuring trading of the ETFs can continue across multiple European exchanges when the extended period of equivalency currently agreed to by the UK and European Union ends as aresult of Brexit. Furthermore, the ICSD model enhances liquidity for investors in the ETFs with less fragmentation across multiple settlement systems. Source: ETF Stream
Flows and Performance
UBS Asset Management has leapfrogged Amundi as the largest European manager of retail investor assets. UBS increased its assets in retail and ETFs to €308bn in the first half of 2020, making it the biggest Europe-headquartered manager of such funds, according to data provider Morningstar. UBS’s net inflows of €9.3bn were driven by investor demand for its US government and investment-grade corporate fixed income funds on the back of the Federal Reserve’s emergency bond-buying programme,
Investors withdrew a net €8.9bn from Amundi’s retail funds sold to European investors over the period, with assets in the strategies down from €319bn to €287bn.
BlackRock retained its position at the top of the Morningstar ranking, which excludes institutional mandates and money market funds. The group managed €814bn in European retail investor assets across its active fund business and passive iShares unit at the end of June.
Vanguard jumped six places year on year to rank just below Amundi, displacing established active houses including JPMorgan, Credit Suisse and Pimco. Source: FT
European equity outperformance
European equities, enjoying a rare streak of global outperformance, just got a strong seal of approval from the largest exchange-traded fund focused on the region. The Vanguard FTSE Europe ETF saw inflows of $242 million in the last session for which Bloomberg has data, the biggest single-day inflow since June 2017. It’s the latest confirmation of money pouring in to back the region’s stock rally that has recouped more than half the losses seen in the aftermath of the coronavirus outbreak. Source: Bloomberg
Emerging Market Equity ETPs
Emerging market equity ETPs have seen their first net inflows since January, with $2bn flowing into the asset classglobally over July, according to the latest global ETP flows report from iShares. Money was added to the space across regions, as opposed to June’s strong APAC-domiciled focus, although single country products were the “main beneficiaries”, with China “in particular” benefiting.
US equity ETPs suffered the opposite fate, recording its first net outflows since August 2019, as $2.2bn left the asset class, driven by US-listed products, which negated the inflows of EMEA- and APAC-listed US equity products.
The vast majority of European equity ETPs were bought by Europeans themselves, as EMEA-listed products comprised 90% of the total $2.9bn global net inflows, with a focus on large cap and broad market exposures. Source: Investment Week
In the US
Baltimore-headquartered investment giant T. Rowe Price has officially entered the ETF space with their launch of four actively managed equity ETFs on NYSE Arca. The launch comprises a pair of ETFs focused on growth stocks and a pair targeting dividend payers and they are the $1.2 trillion asset manager’s first ETFs. The ETFs are modelled on existing mutual funds that hold many tens of billions of dollars in assets and are managed by the same portfolio managers.
Demand for ETFs in Malaysia remains low as there is a general lack of awareness on the benefits of ETFs, how they work, coupled with limited choices for potential investors. There are currently 19 ETFs listed on the Main Market of Bursa Malaysia, comprising one commodity tracker, six equity funds, five Shariah-compliant equity ETFs, one fixed income fund and six leveraged and inverse ETFs.
More engagement programmes are needed to educate the public on how the instrument works, as well as its advantages. “But with an increased number of marketing activities and more educational seminars, we do see a rise in interest in the product — evident in the growing trading volumes.”
Bursa Malaysia told TMR recently it expects more ETFs to be listed locally as the instrument attracts more participants from institutional to retail investors moving forward. Source: The Malaysian Reserve
Fund in Focus
Last week the FT published an article claiming that some ETF investors who buy global emerging market equities through index products may not be aware of how Asia-centric composition they are – or that some of those Asian countries may actually be considered by some as more developed. Personally, I don’t see how that is an issue given the endless supply of educational documents that are required for ETFs but what is more interesting is how quickly China has risen to the top exposure after years of foreign investor restrictions.
Currently, Asia accounts for 78.3% of the MSCI Emerging Market index and China, Taiwan and South Korea alone now account for 63.5%. This is in stark contrast to June 2008, when Brazil had the largest weighting in the MSCI index, of 17.6%, and the seven largest countries, spread over four continents — South America, Asia, Europe and Africa — had a combined weight of 78%. This brings us to take a look at the performance of this week’s Fund in Focus – the Amundi MSCI Emerging Markets UCITS ETF.
No surprise here, the fund tracks the MSCI Emerging Markets index and was launched in April 2018, TER is 0.20%. Year-to-date, the fund is down -5.9% but since the March lows it has returned +32.84% as of Friday, the 14th of August. Below is a sector breakdown as of the 31st of July.
Fund Performance and Flows (data sourced from ETFLogic)
Top 3 Best Weekly Performers in the UK
Lyxor S&P 500 Banks UCITS ETF – Acc +4.76%
Lyxor JPX-Nikkei 400 (DR) UCITS ETF Daily Hedged GBP – Acc +4.43%
Lyxor JPX-Nikkei 400 (DR) UCITS ETF Daily Hedged USD – Acc +4.37%
Top 3 Worst Weekly Performers in the UK
WisdomTree Physical Gold – GBP Daily Hedged -4.50%
iShares USD Treasury Bond 20yr UCITS ETF EUR Hedged (Dist) -3.87%
iShares USD Treasury Bond 20+yr UCITS ETF USD (Acc) -3.77%
Top 3 Weekly UK Inflows
iShares Global Corp Bond UCITS ETF USD Hedged (Acc) +$108.6m
iShares Tips UCITS ETF HDG +$102.8m
iShares Global High Yield Corp Bond UCITS ETF GBP (Dist) Hdg +$85.5m
Top 3 Weekly UK Outflows
iShares USD High Yield Corp Bond UCITS ETF USD (Acc) -$45.5m
ETFS Gold Bullion Securities -$40.6m
iShares USD Treasury Bond 1-3yr UCITS ETF USD (Acc) -$40.6m
*Fund in Focus or any portion of this newsletter are informational only and not intended to provide recommendations of any kind.