ETF Inflows Defy Market Volatility

Exchange traded fund (ETF) inflows have picked up in August, defying volatile markets and outflows from other types of investment vehicles, according to Morningstar, suggesting investors are taking a long term view.

In a video for Morningstar, senior fund analyst Jose Garcia Zarate said global investors piled more than $50 billion into ETFs so far this year to the end of August and hit a record high, which was unexpected due to turbulence in China. Garcia Zarate said equity ETFs had particularly good inflows.

“And what we see is that European investors are perhaps taking the long-term view and they are saying, ok, there may be some trouble in China and some troubles in the emerging markets, but the fundamentals for the European economy and the U.S economy in the medium to long term look pretty ok,” he said.

Figures from ETGI released last week showed that Europe ETFs gathered $11.45 billion in August, hitting its third highest ever amount of monthly net inflows, as investors flocked to European equities.

Furthermore, during the week of 24 to 28 August when the VIX spiked to 40 points, Europe ETF inflows jumped to $3.8 billion, the strongest weekly figure since early February, data from Blackrock revealed, as investors were taking a positive bet on macro recovery and the European quantitative easing programme.

Meanwhile investors have been pulling out of U.S. equities and emerging markets, leading to ETF provider HSBC haemorrhaging assets of €610 million so far this year, according to Deutsche Bank.

But despite certain sectors losing favour, global ETF inflows last month hit $17.2 billion – the strongest August record in five years.