ETFs in Europe posted their strongest quarterly inflows on record in Q2 taking in a total of $57.7bn, according to Morningstar data.
It beats the previous inflows record of roughly $53bn set in Q1 2021 and marks the seventh consecutive quarter of inflows.
Total assets under management (AUM) of ETFs grew 5.2% over the quarter and now amounts to $2.1trn, having surpassed the $2trn milestone in June.
Equity ETFs continued to drive inflows as investors continued to be risk on, gathering a total of $43.6bn in Q2, while bonds accounted for $12.7bn, Morningstar data found.
Investors continued to pour into US-large cap equities, shrugging off a slow start to the quarter on the back of inflation concerns.
Bond ETF inflows rise
Bond ETFs grew over the quarter despite the continued hawkish message from the Federal Reserve, while the European Central Bank cut interest rates as expected.
The iShares France Govt Bond UCITS ETF (IFRB) saw substantial inflows of $880m in July, as investors got tactical with French sovereign bonds ahead of the French election.
Euro corporate bonds saw $152m outflows over the quarter as investors pulled $783m from the iShares Core € Corporate Bond UCITS ETF (IEAC), taking outflows to nearly $3bn in H1.
“ETFs from other providers offering like-for-like exposure have attracted inflows over the same period. Fees may have shaped flow dynamics here. The iShares product charges 0.20%, which is high compared with a 0.07-0.12% fee range for its competitors,” Jose Garcia-Zarate, associate director at Morningstar said.
Exchange-traded commodities (ETCs) posted their fifth consecutive quarter of outflows, losing $2.3bn, driven by precious metals.
Despite this, commodity ETC AUM rose from $115bn to $120bn in the three months to the end of June as the price of gold hit record highs.
Inflows into ESG ETFs also fell over the quarter, from $8.3bn in Q1 to $5.1bn as interest in sustainable investments continued to wane, falling from 17% to 9% of total flows.
ESG ETFs still account for around 20% of the market in Europe, with roughly $410bn in assets.
Conversely, active ETFs continued to grow beyond their market share, pulling in close to $4.5bn in Q2, up from $2.3bn in the previous quarter.
Garcia-Zarate said: “With the acquisition of Tabula, Janus Henderson gains a foothold in the European ETF marketplace with the advantage of piggybacking on Tabula's existing distribution network and know-how in terms of the realities of the local ETF market structure. We expect a raft of new bond active ETF launches in due course.”
