In September, European ETFs recorded their best month ever, having gathered €17.3bn vs. the €8.4bn of outflows we saw in August.
The inflows were driven by equity ETFs, which also enjoyed their best month ever (+€11.1bn). Perhaps unsurprisingly, the US led the way, but Europe wasn’t too far behind (+€3.9bn and +€3.2bn respectively) despite all the doom-mongering of recent months. Moves by the Fed and the ECB to cut rates appeared to be the main catalysts. For Europe, it’s still too early to tell whether the rebound will be short-lived or the start of something more durable. For this more positive sentiment to endure, we suspect it may take some more fiscal activism as stated by the soon-to-be-departing Mario Draghi. Monetary policy may have reached the limits of its effectiveness. In the US, the Fed’s policy of pre-emptive interest rate cuts and a resilient services sector should continue to shore up superior growth and have a positive impact on flows, even if trade war news flow triggers the odd wobble.
Meanwhile, flows into fixed income (€4.3bn) and commodities ETFs (€382m) rebounded slightly. In the former, emerging market govies led the way having gathered €1.3bn. Smart beta flows slowed from where they were in August but remained positive at €204m. Lastly, but by no means least, ESG ETFs keep breaking records. Inflows of €1.2bn took their total for the year to €9.7bn.