Assets held by the European ETF industry increased for a sixth consecutive year and marked a new all-time high at €631.2 bn at the end of December 2017.
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The ETF selection should be carried out in a second step and requires understanding how well ETFs perform compared both to their benchmarks and their peers. It is determined by the Tracking Difference, which is the difference between an ETF and its official benchmark total return on a given period.
The Tracking Error (TE) is a measure to assess how close an ETF tracks the index. This gives a reasonable tool to check the stability of the ETF tracking ability. While the volatility gives a general risk on the return of the ETF and is directly attached to the volatility of the index, the TE presents an additional risk measure that highlights the risk of the replication and not the Market risk.
The primary objective of an ETF is to track its index. In the best-case scenario, the ETF’s tracking difference is expected to equal the ETF fees. However, it is very rare that this scenario happens, ETFs providers either beat this expected return or the other way around, tend to present worst performance.
ETFs may have several similarities in their investment strategy such as the asset class they cover, the geographical exposition, the sector or the maturity. Hence the TrackInsight team created the “TrackInsight Segments” to give users the opportunity to monitor the global industry at a glance and get an unequalled tool for macro analysis.
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The promoters of ETFs enjoyed net inflows (+€6.6 bn) for October. These flows were at the same level as the flows for September but were still below the rolling 12-month average of €6.9 bn.