European equities suffered the worst outflows of all the asset classes covered by TrackInsight in May, with large-cap equities in the region seeing significant outflows during the month to top off a three-month period of negative flows.
European-listed ETFs in the Developed Market Europe Large Cap Equities space saw some €1.24bn of outflows during the month, with the figure as high as €8.6bn for the three months to the end of May.
Developed Market Asia Large Cap Equities also saw redemptions, with investors pulling €849m from the asset class in one month, and some €2.91bn during the three month period.
Equities were hit as investors continued to worry about the referendum on the UK’s membership in the European Union coming up on the 23 June, as well as continued concerns over stalling Chinese growth and the impact of a stronger US dollar on emerging market stocks.
However, surprisingly Developed Markets North America Large Cap Equities saw inflows over the three month period, despite a looming controversial Presidential Election. In May the asset class took in €496m, with €2.07bn flowing in over the three months.
In the bond world, Developed Market Corporate Investment Grade Bond ETFs saw substantial inflows over the month of €1.56bn, taking in some €5.81bn over the three month period, as worries subsided over a potential US interest rate hike in June.
Emerging market debt was also on investors’ agendas, with €190m flowing into the asset class during the month, but these inflows have slowed down compared to the previous two months, with €2.11bn entering the asset class overall during the three months to the end of May.
Investors have been attracted by the higher yields on offer in the EMD space compared to investment grade fixed income, but the use of ETFs demonstrates a wariness to commit to the asset class long term at this stage.
However, flows into Developed Market Corporate High Yield saw a reversal from the previous months, with €218m leaving the asset class during the month of May, though three-month flows remained positive at €2.07bn.
The latest figures reflect investors’ ongoing concerns over the uncertainty looming over the UK and Europe in the run-up to the EU referendum, as well as their changing expectations for a rate hike by the US Federal Reserve.