Stocks lure bulk of fresh Europe ETF money -Markit

Wed Feb 6, 2013 8:15am EST

* Assets under management up $3.28 bln to $220 bln in Jan

* Europe-focused stocks, bonds, currencies in demand

* Euro zone periphery gets biggest boost

By Simon Jessop

LONDON, Feb 6 (Reuters) - Europe-focused exchange-traded funds got a multi-billion-dollar boost in January as fresh money was put to work across stocks, bonds and currencies, data from Markit showed.

Investors pumped $3.3 billion into the 591 ETFs on offer from providers around the world with a focus on Europe, taking assets under management to $220 billion.

Stocks proved the main winner, taking on an extra $2.1 billion to push assets invested to $159.3 billion, a 1.3 percent increase over the previous month, Markit said.

Money has flowed into European assets since the European Central Bank pledged in July 2012 to preserve the euro, removing the fear of imminent collapse that had plagued markets.

Peripheral euro zone indexes, many of which had borne the brunt of investor caution during the worst of the sovereign debt crisis, were the main beneficiaries of investment flow back to the region in January, Markit data showed.

"ETFs in Europe continued to gain traction in 2013. Given the performance of European stock markets, it is not surprising that equity-focused exchange traded products saw the largest inflows," Len Welter, Director, ETFs at Markit, said.

The cash market for European blue-chips recorded its best month in January since the ECB promise, adding 2.5 percent to a rally of around a fifth since mid-2012.

Exchange-traded funds, notes and commodities offer cheap and liquid access to a range of underlying securities. A rapidly growing part of the market, assets invested in Europe-focused funds grew $14 billion in 2012, Markit said.

The firm, which tracks every listed ETF, said Spain and Italy both posted solid increases in net new assets as a percentage of total assets, with Spain funds up 14.4 percent to $1 billion and Italy up 12.9 percent to $4.1 billion.

"Italy's increasing popularity with investors was the stand out over January with both equity and fixed income ETP seeing large inflows," Welter said.

DAX ETFs

Germany's blue-chip DAX index remained the focus of the region's two biggest ETFs, although both saw money exit.

The Blackrock-run iShares DAX and Deutsche Bank's db x-trackers DAX saw outflows of $138 million and $115 million, respectively, to take assets to $18.8 billion and $9.3 billion, respectively.

Over the same period, the underlying cash market for the DAX rose 2.2 percent, lagging a 7.2 percent gain for Italy's FTSE MIB and a 2.4 percent gain for Spain's IBEX, Thomson Reuters data showed.

Funds covering defensive sectors, including healthcare, food & beverages and utilities, saw a combined outflow of $130 million, despite boosting performance by 4.4 percent.

Sectors more geared to fluctuations in the economic cycle, such as technology, financials and industrials, attracted $172 million of fresh money and gained 3.9 percent on average.

Although a much smaller part of the market than equities, at just 49 funds, flows into Europe-exposed currency funds jumped 8.5 percent in January to take total assets to $1.4 billion, led by the six funds exposed to a "long euro" position.

Those betting on a similar sterling position, however, shed the most assets, down 19.1 percent to $4.7 million.

Fixed income funds focused on government bonds posted a 1.9 percent increase in assets under management to $25.2 billion.

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