ETFs
Core Stock and Short-Term Bond ETFs Capture Most Inflows in Q2
Investors flocked to core equity ETFs over the past quarter as the market rally showed no signs of slowing while demand for ESG ETFs continued to weaken.
According to ETFbook data, the S&P 500 and global equity ETFs saw the largest inflows over the past three months as investors remained unconcerned about potential concentration risks in major benchmarks.
THE iShares Core S&P 500 UCITS Exchange Traded Fund (CSPX) attracted the most inflows of any ETF listed in Europe, with $3.8 billion in net new assets, while investors accumulated a total of $4.3 billion in the SPDR S&P 500 UCITS Exchange Traded Fund (SPY5) and synthetic Invesco S&P 500 UCITS Exchange Traded Fund (SPXS).
Additionally, global equity ETFs, including the iShares Core MSCI World UCITS ETF (SWDA), Vanguard FTSE All-World UCITS ETF and SPDR MSCI World UCITS ETF, generated a combined $4.9 billion in inflows in the second quarter.
Stock markets have continued to rally this year, helped by better-than-expected corporate profits and a resilient U.S. economy.
Demand for money market ETFs and short-term bond ETFs was also strong in the second quarter, amid concerns about the Federal Reserve’s ability to cut interest rates in the face of stubborn inflation and a resilient U.S. economy.
THE Xtrackers EUR UCITS ETF Overnight Rate Swap (XEON), for example, raised $2 billion during the quarter, the fourth highest level among all European ETFs, while iShares UCITS ETF $ Treasury Bills with a maturity of 0-1 year (IB01) recorded $1.2 billion in new net assets.
Overall, investor sentiment was upbeat, with European-listed ETPs capturing $59.1 billion in inflows in the previous quarter, up from $49.4 billion in the first quarter.
Demand for ESG ETFs is declining
At the other end of the spectrum, ESG ETFs dominated the outflow chart, accounting for eight of the top 20 redemptions over the past three months.
The eight ETFs are:
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iShares MSCI USA SRI UCITS (SUAS) Exchange Traded Fund
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Amundi MSCI USA SRI Climate Net Zero Ambition PAB UCITS ETF (USRI)
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Paris-Aligned UCITS ETF (DELG) L&G US ESG Exclusions
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Amundi MSCI World SRI Climate Net Zero Ambition PAB UCITS ETF (WSRI)
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ETF BNP Paribas Easy MSCI Europe SRI S-Series PAB 5% Capped UCITS (ZSRI)
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ETF Amundi S&P 500 Equal Weight ESG Leaders UCITS (WELE)
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UBS MSCI Emerging Markets UCITS Socially Responsible ETF (UEF5)
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ETF BNP Paribas Easy MSCI USA SRI S-Series PAB 5% Capped UCITS (EKLDC)
ESG ETFs have been under pressure this year amid regulatory uncertainty and changing investor priorities following the sharp rise in inflation in early 2022.
According to Morningstar data, ESG ETF inflows fell to $44.2 billion in 2023, compared to $91.3 billion in net new assets in 2021. Additionally, they took in just $8.8 billion in the first half of this year, underscoring the waning demand.
Elsewhere, investors also pulled assets out of commodity exchange-traded products (ETPs), including WisdomTree’s physical copper and silver ETCs, which saw combined outflows of $1.6 billion, and $515 million was withdrawn from Invesco’s physical gold ETC (SGLD).