The regulatory and economic clouds overshadowing the European ETF landscape in the second half of 2011 have finally thinned. Net New Assets (NNA) have made a decisive return to positive territory, with flows into European ETFs at USD 6.03 bn for the quarter. Concerns at the macro level have not faded away completely though, and Q1 2012 inflows remain 35.82% lower than those recorded in Q1 2011. A clear trend of investor preference for trackers of corporate bonds and emerging market bonds emerged this quarter, at the expense of money market funds and equity trackers…
Credit Suisse ETFs Sales Strategist Ursula Marchioni and team review the ETF industry trends.
For professional investors and advisers only.This document is not suitable for retail
Key findings of the quarter are:
Investor concerns ease
The regulatory and economic concerns highlighted in the Q3 and Q4 market commentaries eased in Q1 2012. Assets Under Management (AUM) in the European ETF market rose quarter-on-quarter by 10.84% to USD 300 billion at the end of Q1 against a price increase of 10.94% in the MSCI World index in the same period. Net asset inflows of USD 6.03 billion were recorded that contrasted strongly with the net outflows of USD 5.69 billion seen in Q4 2011. The quarter’s inflows were however 35.82% lower than those of Q1 2011, indicating that the market remains cautious about the future.
Preference for corporate and emerging market bonds ETFs
Investor caution is reflected in the trends that emerged in the quarter’s net inflows. Whereas in 2011 equity trackers accounted for 92.82% of all ETF inflows, their share dropped to 66.25% in Q1 2012, accounting for USD 3.99 billion. In their place, investors turned to corporate bond trackers and funds providing access to emerging market debt instruments. Fixed income ETFs recorded record inflows of USD 1.92 billion over the quarter, with January and March recording the largest and second largest monthly flows since January 2011. The worst performing asset class cluster was money market ETFs, recording outflows for the quarter of USD 1.26 billion.
A mixed picture for European providers in terms of NNA
iShares remains the largest provider of European ETFs with a market share of 40.30%, followed by db x-trackers, Lyxor and CS ETFs with 15.10%, 12.55% and 5.66% respectively. The fortunes of the top 10 European ETF providers by AUM in attracting NNA in Q1, 2012 showed a mixed picture − mainly driven by their respective product offering. In Q1, investors in the European ETF market showed polarised views on the underlying beta exposures. Accordingly, iShares, Source and UBS recorded the highest inflows, benefitting from interest in corporate bonds ETFs, innovative strategies on volatility and hedge fund indices and more conservative market funds respectively. Overall, investors continued to show a preference for physically replicated funds in Q1, although the pace of outflows from synthetically replicated funds recorded in the second half of 2011 has faded away.
Changes to Credit Suisse’s ETF Platform
Responding to client-led demand, Credit Suisse has made some significant changes to its ETF platform in the last six months. 10 synthetically replicated ETFs have either already been or are in the process of being converted to physically replicating. In a move to maintain the industry leading transparency of its products, Credit Suisse now publishes the collateral accepted by the 13 CS ETFs engaging in securities lending daily at www.csetf.com.
Source: ETFWorld – Credit Suisse
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