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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.
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.
Important risk information
The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.
Past performance is not a reliable indicator of future results.
Some funds invest in emerging markets which can be more volatile than more established markets. As a result the value of your investment may rise or fall.
Investments in smaller companies may be more volatile than investments in well-established blue chip companies.
ETF shares can be bought or sold only through a broker. Investing in ETFs entails stockbroker commission and a bid- offer spread which should be considered fully before investing.
Funds investing in fixed interest securities carry the risk of default on repayment and erosion of the capital value of your investment and the level of income may fluctuate. Movements in interest rates are likely to affect the capital value of fixed interest securities. Corporate bonds may provide higher yields but as such may carry greater credit risk increasing the risk of default on repayment and erosion of the capital value of your investment. The level of income may fluctuate and movements in interest rates are likely to affect the capital value of bonds.
The Funds may use derivatives in order to reduce risk or cost and/or generate extra income or growth. The use of derivatives could increase or reduce exposure to underlying assets and result in greater fluctuations of the Fund's net asset value. A derivative is a financial contract whose value is based on the value of a financial asset (such as a share, bond, or currency) or a market index.
Some funds invest in securities which are denominated in different currencies. Movements in currency exchange rates can affect the return of investments.
For further information on risks please see the “Risk Factors” section of the prospectus on our website at https://global.vanguard.com.
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© 2023 Vanguard Investments Switzerland GmbH. All rights reserved.