European ETF investors switch to riskier areas

European ETF investors increased risk-taking last quarter by withdrawing cash from money market index products, the only sector to suffer withdrawals, while boosting assets in all other sectors.

Overall the European ETF industry grew assets by about 33% from €148bn in the three months to 30 September, according to data provider Lipper’s quarterly European industry report.

Emerging markets equity ETFs – historically adjudged among the riskier products – rewarded investors last quarter, as most of the industry’s top 10 equity-linked funds by performance focused on developing regions.

The best ETF – Non-financial Istanbul 20 Type A, which made 21.6% – targeted a developing market, but so too did the worst – the db x-trackers FTSE Vietnam ETF, which fell 24%.

Nine of 26 European money market ETFs examined registered quarterly losses, mainly due to fluctuations in the euro, the base currency of Lipper’s report.

Euro-denominated investors would have suffered losses exceeding 10% from four money market ETFs in the three months to 30 September.

A diverse range of commodity-based ETFs filled the top 10 places for the quarter, from palladium (Julius Baer and ZKB), to agriculture (Amundi and Market Access RICI) to silver (Julius Baer).

Only one equity-linked real estate ETF of 28 analysed lost money, whereas a host of bond-linked ETFs, notably short Treasury products, fell in value.

When considering turnover in September, investors trading ETFs on German exchanges were proportionately the most active, accounting for 31% of total industry turnover last quarter, followed by Euronext (19.3%), London (14.8%) and Borsa Italiana (13.8%).

Not surprisingly, three-month rolling turnover has fallen most sharply over the year to October for Greece-focused products, down 81%.

Turnover among all European ETFs fell 30.9% to a monthly average of €35.5bn last quarter, though this was from a relatively high €51.4bn the previous period, driven largely by record-high turnover in May.

Europe’s index-tracking industry remains concentrated, with the five largest promoters accounting for 77% of industry assets.

Some 41 ETFs, mainly equity-linked, launched in Europe last quarter.

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David Walker

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