European equity ETFs finally attract new money, says Lyxor
After a long period of outflows, European equity exchange traded funds have finally started attracting investors again, as hopes of recovery in the eurozone have a positive impact on investor sentiment.
According to Lyxor’s latest report, the past quarter has seen €2.4bn of inflows into European regional equities.
The figures suggest a shift in sentiment from the general trend so far this year. Investors have been avoiding European equities, fearing uncertainty in the common currency area.
However, with government bonds continue to offer poor yields and European equity indices rising, investors may be finally returning to this asset category. The MSCI Europe index, for example is up 7.84% year to date. In comparison, German government bonds yield just 1.44% over 10 years.
Neil Veitch, manager of the SVM World Equity fund, said there are many attractive opportunities to be found in the European equity space. His fund seeks out stocks trading at a discount to their intrinsic value.
Jens Ehrhardt of Munich-based wealth and asset manager DJE Kapital, shares Veitch’s view on European equities. Back in April, he said the sovereign debt crisis had left European equities attractively value and there were “many bargains to be had looking at current valuations of many stocks.”
Other sources suggest that it is not just the core European states that are looking good. European periphery constituents have performed strongly over the summer compared to core Europe constituents in the the S&P Global Broad Market index.
Lyxor’s report shows investors are still attracted to emerging regions. Emerging market country ETFs have seen inflows for the second month running, after a period of redemptions.
Apart from equities, investors demand continues for fixed income products. The focus has been on broad government bonds, despite their disappointing performance figures.