Europe’s rapidly expanding exchange traded fund industry suffered its worst month on record in March as stock markets across the region fell sharply in response to the economic disruption caused by the coronavirus pandemic.
Investors pulled €21.9bn from ETFs listed in Europe in March, the largest monthly withdrawal on record, according to Morningstar, the data provider.
“We haven’t seen outflows like these even in the darkest days of the global financial crisis of 2008 or during the height of the eurozone debt crisis,” said Jose Garcia-Zarate, associate director, passive strategies research at Morningstar.
Outflows in March from European listed ETFs were more than double the previous record of €8.3bn set in August 2019 when concerns about the impact of rising trade tensions between the US and China prompted investors to reduce their exposures to stock markets.
Europe’s ETF industry has enjoyed consistent growth over the past two decades with only temporary interruptions to its expansion. But the combination of heavy withdrawals in March along with the onset of bear market conditions raises questions about the future growth trajectory for ETFs in Europe after the industry’s assets sank 13 per cent to €781m last month.
“The scale of the drop in assets is quite staggering. This is quite a change from the start of 2020 when we all were placing bets on when ETFs in Europe would hit the €1tn mark,” said Mr Garcia-Zarate.
BlackRock, the world’s largest asset manager and the dominant player in Europe’s ETF industry, registered outflows of €6.6bn in March. UBS, the fifth-largest player, had even larger outflows of €7.3bn, while DWS, the asset manager owned by Deutsche Bank, suffered outflows of about €4.8bn.
Vanguard, the world’s second-largest ETF provider despite its much smaller presence in Europe, gathered inflows of €1.9bn in March. Pennsylvania-based Vanguard was the only top-10 ranked European ETF manager to attracted significant inflows, outperforming competitors by a clear margin.
ETFs tracking stock markets registered net outflows of €13bn last month. Withdrawals from US and emerging markets accounted for the bulk of the outflows, but equity ETFs providing exposure to larger European companies, Germany and the UK attracted combined inflows of about €4.7bn.
Fixed-income ETFs also suffered net outflows of about €13bn in March. Euro-denominated corporate bond ETFs, emerging markets debt ETFs and high-yield ETFs saw the heaviest withdrawals.
The turmoil prompted by coronavirus helped fuel interest in gold, which is often seen as a haven in periods of market volatility, helping commodity ETFs gather significant inflows of about €3bn last month.
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