ETF market review: Equity dominates inflows in February

09 Mar 2023
Market commentary, Portfolio construction

Highlights

  • European-domiciled ETF flows remained in positive territory but slowed down compared with the previous month.
  • The ETF market saw inflows of $9.2 billion in February, with equity ($7.1 billion) and commodities ($1.4 billion) products accounting for the majority of new assets.
  • Fixed income ($492 million) and multi-asset ($116 million) ETFs contributed marginally to total flows.

 

European-domiciled ETF flows remained in positive territory in February1 despite a slowdown relative to the previous month, as economic data releases suggested that further monetary tightening remains likely. The ETF market saw inflows of $9.2 billion in February, with equity ($7.1 billion) and commodities ($1.4 billion) products accounting for the majority of new assets. Fixed income ($492 million) and multi-asset ($116 million) ETFs contributed marginally to total flows.

Within equities, core strategies remained the largest contributor to inflows in February, taking in $4.4 billion of inflows. Of this, emerging market ($2.5 billion), world ($1.2 billion) and Europe ($1.1 billion) exposures accounted for the greatest inflows. As was the case the previous month, United States exposures recorded the largest outflows (-$1.3 billion) in February. Sustainable ETF exposures gained $3.6 billion, driven by inflows into emerging market ($1.7 billion), Europe ($882 million), global ($575 million) and world ($543 million) exposures. ‘Market access’2 ETFs recorded inflows of $557 million, with China ($359 million) and Asia ($199 million) strategies the leading contributors. South Korea market access exposures saw the largest outflows, with -$259 million. The only equity category with notable outflows in February was smart beta (-$1.1 billion), with most outflows coming out of world (-$694 million) and United States (-$765 million) exposures.

In fixed income, total inflows of $492 million were primarily driven by new investments into corporate ($1.8 billion) and aggregate ($516 million) bond ETFs, while ultra-short maturity (-$562 million), floating-rate (-$585 million) and government (-$1.0 billion) bond exposures detracted from total asset class flows. Within corporate bond ETFs, euro area ($590 million) exposures were again the main drivers of inflows, after recording $4.1 billion of new assets in January. Global exposures ($355 million) led aggregate bond inflows, while euro area (-$100 million) vehicles detracted. Euro area exposures (-$405 million) again saw the largest outflows from ultra-short maturity bond exposures, while United States (-$412 million) floating-rate strategies were the primary driver of outflows from floating-rate ETFs. Government bond ETF outflows were mainly driven by flows out of Germany exposures (-$990 million).

Commodity ETFs saw net inflows of $1.4 billion, with ex-agriculture ($981 million) and broad commodity ($627 million) exposures taking the lion’s share.

Vanguard UCITS ETFs

In February, all of Vanguard’s UCITS ETFs recorded positive flows, with net inflows into the range reaching $1.5 billion. Flows were split between Vanguard’s equity UCITS ETF range ($1.0 billion) and fixed income UCITS ETF range ($546 million).

In equities, inflows were led by the Vanguard FTSE All-World UCITS ETF ($432 million), the Vanguard FTSE Developed Asia Pacific ex Japan UCITS ETF ($213 million) and the Vanguard FTSE Developed Europe ex UK UCITS ETF ($161 million).

In fixed income, the primary drivers of inflows were the Vanguard EUR Corporate Bond UCITS ETF ($128 million), the Vanguard USD Treasury Bond UCITS ETF ($85 million) and the Vanguard Global Aggregate Bond UCITS ETF ($73 million). In the ESG category, the Vanguard ESG Global Corporate Bond UCITS ETF added $33 million in flows over the month.

 

1 Source: ETFbook, as at 28 February 2023.

2 Source: ETFbook, as at 28 February 2023. The ‘market access’ category includes difficult-to-access markets such as emerging markets.

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