Posted inDACHEquitiesFRENELUX

Investors switch to trackers in European equity markets

In the first half of 2017, French equity ETFs saw net inflows of €962m according to data released by TrackInsight. The bulk of these flows came in after the French presidential elections in April and May.

By contrast, actively managed French equity funds suffered net redemptions of €2.3bn in the first five months of the year. Outflows actually accelerated in May (to €984m), suggesting that investors gave up chasing alpha after the French elections, opting for beta risk instead in the expectation that the buoyant sentiment that followed Emmanuel Macron would lift all boats, making it harder for active managers to outperform.

Until recently, volatility has indeed been close to record lows, but that changed last week as stock dispersion increased when it became clear the ECB is preparing to tighten monetary policy.

Investors in Swiss equities made a similar switch to beta risk: while active funds suffered net outflows of €1.3bn in May alone, Swiss equity ETFs received positive flows of €577m in the first half of 2017.

 

The switch to trackers was not as pronounced in other regional equity markets in Europe though: while Spanish equity ETFs saw net inflows of €742m in the first half of the year, actively managed funds received almost as much net new money.

For Europe as a whole, ETF inflows also outpaced those into actively managed funds: in May, net flows into active European equity funds amounted to €1.5bn, while ETF inflows were twice that number.

      

Part of the Bonhill Group.