Investors piled into core equity ETFs last quarter as the market’s rally showed no signs of slowing while demand for ESG ETFs continued to wane.
According to data from ETFbook, S&P 500 and global equity ETFs saw the strongest inflows over the past three months as investors remained unconcerned about potential concentration risks across mainstream benchmarks.
The iShares Core S&P 500 UCITS ETF (CSPX) captured the most inflows across all European-listed ETFs, with $3.8bn net new assets, while investors piled a combined $4.3bn into the SPDR S&P 500 UCITS ETF (SPY5) and the synthetic Invesco S&P 500 UCITS ETF (SPXS).
Furthermore, global equity ETFs including the iShares Core MSCI World UCITS ETF (SWDA), the Vanguard FTSE All-World UCITS ETF and the SPDR MSCI World UCITS ETF which pulled in a combined $4.9bn in Q2.
Equity markets have continued to grind higher this year amid stronger-than-expected company earnings and a resilient US economy.
Demand for money market and short-duration bond ETFs was also strong in Q2 amid concerns over the Federal Reserve’s ability to cut interest rates in the face of stubborn inflation and a resilient US economy.
The Xtrackers EUR Overnight Rate Swap UCITS ETF (XEON), for example, pulled in $2bn over the quarter, the fourth-highest across all European ETFs, while the iShares $ Treasury Bond 0-1yr UCITS ETF (IB01) saw $1.2bn net new assets.
Overall, investor sentiment was bullish as European-listed ETPs captured $59.1bn inflows in the previous quarter, up from $49.4bn in Q1.
ESG ETF demand wanes
At the other end of the spectrum, ESG ETFs dominated the outflows chart, accounting for eight of the top 20 redemptions over the past three months.
The eight ETFs are:
iShares MSCI USA SRI UCITS ETF (SUAS)
Amundi MSCI USA SRI Climate Net Zero Ambition PAB UCITS ETF (USRI)
L&G US ESG Exclusions Paris Aligned UCITS ETF (DELG)
Amundi MSCI World SRI Climate Net Zero Ambition PAB UCITS ETF (WSRI)
BNP Paribas Easy MSCI Europe SRI S-Series PAB 5% Capped UCITS ETF (ZSRI)
Amundi S&P 500 Equal Weight ESG Leaders UCITS ETF (WELE)
UBS ETF MSCI Emerging Markets Socially Responsible UCITS ETF (UEF5)
BNP Paribas Easy MSCI USA SRI S-Series PAB 5% Capped UCITS ETF (EKLDC)
ESG ETFs have been under pressure this year amid regulatory uncertainty and changing investor priorities following the sharp spike in inflation at the start of 2022.
According to Morningstar data, ESG ETF inflows fell to $44.2bn in 2023, down from $91.3bn net new assets in 2021. Additionally, they have taken in just $8.8bn in the first half of this year, highlighting the diminishing demand.
Elsewhere, investors also pulled assets from commodity exchange-traded products (ETPs) including WisdomTree’s copper and physical silver ETCs, which saw a combined $1.6bn outflows, and $515m was withdrawn from the Invesco Physical Gold ETC (SGLD).
