Flows into ETFs in Europe are growing, especially those investing in US stocks. In fact, US shares led the collection in the third quarter, recording net new assets (NNA) of 20.3 billion euros in the period, while in the month of September alone there were flows of 9.5 billion euros. This is what emerges from Amundi’s monthly analysis.
The reallocation towards US stocks – explains the European manager – is part of a broader trend of growing risk appetite on the part of investors, which has rewarded stock collections with over 31.4 billion euros in flows, compared to the 4.1 billion euros invested in fixed income.
Stock ETFs: US stocks and defense are strong
US stocks found their appeal again in September, recording inflows of 9.5 billion euros and favoring broad market indices such as the S&P 500. The month’s collection represents almost half of the resources invested in the quarter for 20.3 billion. Global indices were the second most popular strategy, raising €7 billion in the past month and €18.8 billion in the quarter.
Despite the return of flame on US equities, in terms of inflows since the beginning of the year, European shares remain in the lead with 53.4 billion euros of new assets, ahead of the World (47.7 billion euros), All Country (32.3 billion euros) and USA (29.5 billion euros) strategies.
Interest in emerging market (EM) equities has also grown in recent months, seeing inflows of €4.9 billion in the month and €9.2 billion in the quarter. An interest fueled by the weakening of the US dollar and rate cuts by the Federal Reserve as well as by the fiscal incentive regime offered by many emerging economies.
In the thematic indices, Defense-based strategies remain in the lead, raising 474 million euros in September, bringing the total for the quarter to 1.5 billion euros and the collection since the beginning of the year to 8.9 billion euros. Inflows are largely driven by Europe’s commitment to increasing defense spending, and allocations primarily affect this region.
At a sector level, the financial sector raised 3 billion euros in September, bringing the total for the quarter to 3.9 billion euros, with a prevalence of exposures to global and European financials.
There was also renewed interest in ESG equity ETFs, which raised €6.5 billion in September, bringing the quarterly total to €12.7 billion, although this figure represents a modest percentage of the total equity allocation.
Fixed income: focus on high yield and emerging markets
In fixed income (new assets for a total of 4.1 billion), investors allocated 1.1 billion euros to high yield (HY) bonds in the month of September and the same amount of resources to government bonds (1.1 billion), with allocations of 457 million euros in euro-denominated bonds and 446 billion euros in dollar-denominated ones.
Investor demand for HY bonds has encompassed both euro-denominated and US dollar-denominated debt. In particular, this demand has been driven by US President Donald Trump’s lenient attitude towards the oil sector, which accounts for the majority of emissions from this asset class.
In the third quarter, investment grade (IG) corporate debt led the pack with inflows of €6.3 billion, while resources allocated to government bonds in the quarter stood at €2.6 billion, accounting for a third of inflows into IG corporate debt. In particular, investors have strongly favored US debt, allocating 2.8 billion euros to this asset class.
Investors favored the short and medium term segment of the curve, disinvesting 473 million euros from maturities exceeding ten years. About 30% of inflows into euro-denominated corporate debt have gone to the short-term end of the curve this year, compared to about 16% last year. This preference for the short-term segment of the curve is linked to the interest rate outlook in both the US and Europe, with both regions likely to reduce interest rates.
As with equities, emerging market debt has attracted investor attention amid the weakening US dollar, raising 515 million euros in September and bringing the quarter’s total to 1 billion euros.
