ETPs: US investors leave Europe, but emerging markets gain

ETPs downUS investors concerned about European growth exited exchange-traded products (ETPs) in August, contributing to an overall $2.8 billion (€2.1 billion) outflow from the Europe equity category.

Growth concerns and the lack of a stronger reaction from the European Central Bank caused the outflow, according to BlackRock, which monitors ETP flows and owns iShares, an exchange-traded fund (ETF) provider.

The figures reflect recent data from Markit showing that US investors pulled out nearly $4 billion from Europe ETFs in the six weeks to 18 August. Withdrawals were heaviest from ETFs exposed to Germany.

However, the BlackRock data shows that, overall, ETP investors bucked the usual summer slowdown in August by investing $23.3 billion in financial markets, putting the industry on track for a record year. The figure is the highest ever for an August.

Investors increased allocations to emerging markets and Asia equity in search of relative value, but also bid up safe-haven fixed income assets amid geopolitical uncertainty, BlackRock says in its ETP Landscape.

Emerging market equity had a fifth straight month of inflows with $4.7 billion focused in broad emerging market and China funds, while developed Asia added another $3.4 billion led by Japan.

Fixed income flows of $11.5 billion included a high yield rebound but the bulk of new assets went to safer long-duration treasury and investment grade corporate funds.

BlackRock says that Europe-listed fixed income ETPs have been a big driving force behind flows lately with assets recently surpassing $100 billion.

Ursula Marchioni, head of ETP research for Europe, Middle East and Africa at iShares, says: "This August was the best August for ETP growth, and the industry is on track to break all previous asset gathering records in 2014. Globally, investors flocked to fixed income and emerging markets equity."

Assets of the European ETP industry now stand at $470 billion. Given inflows of nearly $50 billion this year, the industry could be on course to break the $500 billion total asset level by the end of the year, Marchioni adds.

The outflows from European equities came at a time when the German economy contracted in the second quarter, though Markit said in August that survey data suggested the economy was in better health than the official data implied and that economic growth "should rebound in the third quarter as the recovery builds".

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