ETFs
ETFs boost capital inflows to Article 6 funds, says EFAMA | News
Capital flows into Article 6 funds, under the Sustainable Finance Disclosure Regulations (SFDR), saw a resurgence last year, driven by the growing popularity of exchange-traded funds (ETFs) that track broad stock and bond indexes, a further sign that costs and performance are more important to investors than strict sustainability requirements.
Article 6 funds of undertakings for collective investment in transferable securities (UCITS) recorded inflows of €101 billion last year, a turnaround from -€208 billion in 2022, according to THE Information book 2024 published by EFAMA this week.
SFDR Article 6 bond funds attracted the highest net inflows at €92 billion, with bond ETFs performing particularly well in 2023, the study added.
Article 6 funds have performed well, EFAMA senior economist Thomas Tilley said on a conference call this week introducing the 2024 Fact Book.
He noted that most ETFs track broad indexes; Since not all stocks or bonds in these indices meet the sustainability criteria of the SFDR, these ETFs are generally classified by default as SFDR Article 6 funds.
Investors are increasingly refraining from deploying capital to Article 9 funds. Inflows into these funds – also known as “dark green” funds – declined last year to just €3 billion, compared with 20 billion in 2022, according to an EFAMA study.
“We see a big change [in 2023] compared to 2022, where Section 9 funds were holding up pretty well,” Tilley added.
The slowdown in net inflows into SFDR Article 9 funds means that continued investment in sustainable funds cannot be taken for granted, EFAMA President Sandro Pierri said in the report’s foreword.
Investments in the money market pushed flows into SFDR Article 8 funds which partially recovered, from -75 billion euros in 2022 to -31 billion euros in 2023, the report reveals.
Rising interest rates have boosted flows into bond funds and money market UCITS funds, which reached 144 billion euros and 170 billion euros respectively last year, according to analysis by the EFAMA. Multi-asset UCITS, on the other hand, experienced their first net outflows in 10 years (-120 billion euros), he adds.
Total assets under management (AUM) in UCITS funds increased by 10% year-on-year in 2023 to €13.1 trillion, slightly below the decade average, according to Tilley.
Most of the growth (8.6%) in terms of assets under management is the result of stock and bond market appreciation, and only a minor part of the growth (1.4%) is due to net sales, he added.