In January, European exchange-traded funds and products gathered the largest amount of monthly net inflows following on from a record 2014.
The ETF/ETP industry in Europe had net inflows of $14.9bn last month, beating the previous record of $10.8 bn in net new assets in July 2014 according to preliminary data from ETFGI’s end January 2015 global ETF and ETP industry insights report.
Equities gathered the largest net inflows of $9bn, followed by fixed income with $5.2bn and then commodities with $760m according to the consultancy.
Deborah Fuhr, managing partner at ETFGI, said in a statement: “The ECB announced on January 22 a stimulus package which will total US$1.27 trillion based on buying $69bn a month in public and private bonds to stimulate the European economy.”
BlackRock’s iShares gathered the largest net inflows in January of $6.5bn, followed by UBS GAM with $2.3bn, and then Deutsche Bank’s db x/db ETC with $1.5bn.
The all-time high monthly inflows in Europe in January follow on from 2014 breaking the previous full-year record with $62bn in net new assets
Fixed income ETF inflows are expected to grow in Europe but Rob Waldner chief strategist and head of the multi-sector team for Invesco Fixed Income said in a report that the firm is cautious on US and European credit.
“While European investment grade credit may be supported by the ECB’s program of quantitative easing, we believe US investment grade would likely underperform US Treasuries in the current environment, although we would expect it to perform better than riskier assets,” Waldner added.
Waldner said policy surprises from a range of central banks have resulted in a doubling of currency volatility over the past six months which could increase the costs of global financing and trade and potentially hamper the performance of US credit assets.
“It is difficult to forecast exactly where the stresses will manifest themselves, but as they build, we believe the probability of an “accident” increases,” he said.
US corporate earnings are likely to disappoint based on global economic weakness, the strength of the US dollar and declining energy earnings. In addition Invesco believes that current market sentiment and market pricing of credit assets are building in a recovery in oil prices into the next year, while oil prices are likely to remain depressed. This could lead to a potential fallout among some corporate and sovereign issuers in coming quarters.
Waldner said: “We believe investors should be cautious in taking credit exposures, and that simple broad credit allocations are to be avoided in favor of more directed, idiosyncratic credit opportunities.”
Bill McNabb, chief executive of Vanguard, said on in a blog that the US manager’s global stock and bond market projections are the most muted since 2006.
Vanguard predicts that the most likely average annual return for global stocks overt the next decade will be between 5% and 8%, lower than the average 10% per year between 1926 to 2014.
In global bond markets, Vanguard expects average annual returns over the next decade of 2% to 3.5%, lower than the historical average of 6% since 1926.
McNabb wrote: “Our expectations for lower returns are coupled with expectations for increased volatility. Those investing for retirement should consider saving more of their paychecks.”
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