ETF Investors Snap Up European Equities Following Rally

Quantitative easing from the European Central Bank has helped boost European stocks - and passive fund flows have followed

Kenneth Lamont 16 November, 2015 | 12:01PM
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One of the prominent macro-trends of the last 12 months has been the return to favour of European equities, driven by attractive valuations and the full backing of the European Central Bank (ECB). This backing includes an unprecedented quantitative easing (QE) programme, which will run until at least September 2016 and the commitment to keep interest rates at a historically low level.

This renewed investor enthusiasm is reflected in net funds flows, with the European large-cap equity ETF sector the main beneficiary, attracting over €13 billion in new money. One of the chief recipients of these flows has been the db x-trackers Euro Stoxx 50 (DBXE). The popularity of this fund is unsurprising given its income generating potential, large size and aggressively low management fee of just 0.07%.

ETF Investors Also Look Across the Pond

Meanwhile, despite uncertainty surrounding rate rises, the US equity market remains buoyant. US large caps have experienced particularly strong net inflows over the 12 month period, helping to push the S&P 500 to record levels.

One of the ETFs that has benefited most from the booming US stock market in the past few years has been the distributing Vanguard S&P 500 ETF (VUSD). Since its launch in 2012, the fund’s assets under management have ballooned, making it the second largest ETF in Europe. Only the accumulating iShares Core S&P 500 (CSSPX), which has also received generous asset flows, can claim more assets.

The continued dominance of a single player, namely iShares, within the European ETF market is clear from a quick glance at the 10 largest funds. Seven of them are iShares funds. Net flows into iShares ETFs totalled €22.4 billion in the year, dwarfing those of nearest rival db X-trackers who attracted €8.7 billion.

A version of this article has appeared in Professional Wealth Management

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
iShares Core S&P 500 ETF USD Acc438.00 USD-4.41Rating
Vanguard S&P 500 UCITS ETF81.30 USD-4.38Rating
Xtrackers Euro Stoxx 50 ETF 1D43.07 EUR-4.14Rating

About Author

Kenneth Lamont  is a passive funds research analyst for Morningstar Europe.