European equity ETPs buck trend with Q1 outflows

Wed Apr 4, 2012 6:57am EDT

* Record start to the year for global ETPs

* European equity products buck trend with outflows

* Fixed income and emerging markets see strong start

By Anjuli Davies

LONDON, April 4 (Reuters) - Investors withdrew $600 million of cash from European equity exchange traded products (ETPs) in the first three months of 2012, bucking a global trend of record first quarter inflows into the sector, data from BlackRock showed on Wednesday.

Exchange-traded products (ETPs) is an umbrella term that covers exchange-traded funds (ETFs), exchange-traded notes (ETNs), and others. ETFs trade like a share, and track an index, either by holding the underlying assets, or by synthetically replicating the returns using derivatives.

In the first quarter of the year, the industry pulled in $67.3 billion of net new assets, an increase of 57 percent year-on-year, marking the best annual start on record, Blackrock estimated.

But demand for ETPs based on European equities continued to fall, after net redemptions at the end of last year, in contrast to the average inflows of $5.3 billion a quarter in 2011.

"Despite improvements in the global economic outlook, there is still a degree of volatility and uncertainty around issues such as the euro zone and oil prices, which will continue to colour investor sentiment in the months to come," Jennifer Grancio, managing director at BlackRock said.

In contrast, emerging market equity ETPs saw their best start to the year on record taking $13.7 billion in new money, while North American equity ETPs saw robust inflows of over $22.7 billion accounting for 29 percent of total ETP inflows.

Fixed income was another beneficiary, pulling in $19.5 billion of new money in the first quarter, also a new high. Within that space, though, there were marked differences with investment grade and high-yield corporate debt accounting for 85 percent of all inflows. Government bond products, by contrast, saw outflows of $1.5 billion over the quarter.

Investors have also flocked to products that bet on or hedge against volatility, whose wild fluctuations over recent months have prompted an investigation by U.S. regulator, FINRA .

Globally, ETP assets under management hit around $1.7 trillion at the end of March, with overall growth of $200 billion including new money and favourable market and exchange rate movements.

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