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Exchange-traded funds allowed billions of dollars to flow from Europe to US stocks as investors crammed into ETFs exposed to this year’s huge US stock rally, according to data from Refinitiv.
European flows to the US equity ETF sector jumped to € 27 billion in the 10 months to the end of October 2021, nearly four times the € 7 billion in inflows recorded for US equities for the year. ‘whole last year, according to Financial Times calculations based on Refinitiv data. .
In contrast, European equity ETFs listed in Europe had attracted only € 5 billion in inflows at the end of October, although this was also a significant jump from the € 2 billion. euros made last year.
Deborah Fuhr, founder of ETFGI, an advisory group, said the flows showed investors were looking for the best returns. “It has nothing to do with European equity ETFs per se. It is more about the exhibition in terms of where [investors] believes the markets will perform better, as well as asset allocation, ”she said.
Jose Garcia-Zarate, associate director of passive research, Europe, Middle East and Africa at Morningstar, acknowledged that US stocks have been particularly attractive. “It all started at the end of 2020, when vaccines began to be deployed. And that paved the way for renewed interest in equities, and in particular equities in the United States, ”he said.
The flows could be explained in part by the general preference of European institutional investors for passive strategies to access US equities, according to Guillaume Prache, CEO of BetterFinance.
Garcia-Zarate agreed, “Passive vehicles, such as ETFs and index funds, are the default investment option for US stocks. It is very difficult to find an active manager in the US equity market capable of beating an index, such as the S&P 500. ”
But Patrick Wood Uribe, chief executive of Util, a provider of sustainable investing data, said the trend indicated potential difficulties in sustaining a commitment to sustainable investing if too much emphasis was placed on sustainability. performance.
“Yes [investing in overseas equities] happens too often with European investments, there will be a dislocation between the source of ownership of the assets and the type of destination of the investment. And that’s something that, if it doesn’t eventually dissipate over time, is going to be a problem. “
According to Refinitiv, assets under management in the European ETF industry reached around 1.3 billion euros at the end of October. US equity ETFs took the lion’s share with combined assets under management of € 286 billion, followed by global equities (€ 181 billion) and European equities (€ 136 billion).
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