ETFs: Recap of 2012 & Peek into 2013

Morningstar's senior ETF analyst Jose Garcia-Zarate discusses asset flows and trends in the ETF industry in 2012, and provides a forecast for 2013

Jose Garcia Zarate 21 December, 2012 | 11:49AM
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As we approach the end of 2012, the time has come to take stock of the last 12 months. 2012 has proved a fertile year for the European exchange-traded fund (ETF) and exchange-traded product (ETP)  industry, with growth in assets under management (AUM) well into double digits. Specifically, we’ve seen around 20% year-on-year growth in AUM based on data from the end of November. The ETP industry now has around €275 billion in AUM due to the virtuous combination of roughly €15 billion in net inflows and capital appreciation across broad asset classes. These figures compare very positively to 2011, which was a year that closed with a slight year-on-year decrease in AUM as net capital losses (mostly owing to poor equity markets) offset overall positive money flows.

Show Me the Money: A Round-Up of Where Assets Flowed in 2012

ETP investment flows in 2012 have remained broadly underpinned by a “risk-off” rationale, as hopes for improved economic performance in the early stages of the year gradually gave way to concerns of a renewed slowdown. Growth expectations were duly revised down on the sober realisation that emerging market economies could not transition overnight from export-oriented to consumer-driven entities.

As such, the bulk of new net money into ETPs has mostly favoured the perceived capital-protective properties of corporate and emerging market government bonds and gold. Yet none of these top the list of best performing ETPs of the year. You’d have been better off investing in Turkish, European Insurance or European Auto & Parts equity ETFs. Similarly, you’d have been better off placing your money in silver, corn and soya bean ETPs instead of jumping onto the gold train.

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About Author

Jose Garcia Zarate

Jose Garcia Zarate  is Associate Director of Passive Strategies Research for Morningstar Europe

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