European ETF market review: December
15 January 2021 | Markets and Economy
Commentary by Sophie Hunter, ETF Capital Markets specialist, and Nusrath Hussain, senior ETF product specialist.
- European-domiciled ETFs recorded total inflows of $120.6 billion in 2020.
- Fixed income ETFs experienced positive flows for the third month in a row in December.
- Trading volumes on the secondary market declined in December.
Month at a glance2
European-domiciled ETFs recorded their ninth consecutive month of inflows in December, with $27.7 billion, as financial markets were boosted by the start of Covid-19 vaccine deployment and the signing of a new stimulus bill in the US. European-domiciled fixed income ETFs experienced positive flows for the third month in a row after suffering net outflows in September.
Equity ETFs attracted $22.2 billion of inflows. Sustainable equity ETFs again experienced the largest inflows, led by US exposures. Core equity strategies, led by emerging-market equity exposures, also saw strong inflows. Sector equity ETF strategies, meanwhile, suffered the largest outflows.
Commodities ETFs saw their second consecutive month of outflows in December, as investors pulled $588 million during the month. This was again driven largely by ETFs tracking the price of gold, which experienced the largest outflows in the category as the risk-on sentiment weighed on the price of gold.
Monthly and year-to-date European ETF flows ($ millions)
Equity ETFs claim lion’s share of inflows in December
Source: ETFbook. Net cash flows ($ millions) for European-domiciled ETFs, month ended 31 December 2020.
Source: ETFbook, month ended 31 December 2020.
Across Vanguard’s UCITS ETF line-up, spreads tightened in December relative to November’s levels as risk sentiment improved, compressing by 11% (median month-on-month)3.
Secondary-market trading volumes
Trading volumes on the secondary market declined in December. On-exchange volumes were down 7% month-on-month, with an average daily volume of $167 million across the Vanguard UCITS ETF range in December4.
Top 5 Vanguard European-domiciled ETFs by net cash flow in $ millions (for December 2020)
Source: ETFbook, as at 31 December 2020.
1 Source: ETFbook, month ended 31 December 2020.
2 Source: ETFbook, month ended 31 December 2020.
3 Source: Bloomberg, month ended 31 December 2020.
4 Source: Bloomberg, month ended 31 December 2020.
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