Instead of the Euro Stoxx or DAX, the MSCI World and S&P 500 have been more popular this year. In the bond segment, government bond ETFs have recently been more popular again. Trackers with ESG filters are already a perennial favorite.
27 December 2022. Frankfurt (Börse Frankfurt). There is nothing to sugarcoat: The year ending was miserable as an investment year. "2022 will be remembered as the worst year in two decades for global equity markets," says Francesco Lavecchia of analyst firm Morningstar. But it wasn't just equities that slid deep into the red; bonds recorded even greater losses in some cases.
However, the ETF market continues to grow - with some shifts. This year, for example, investors focused mostly on global and U.S. equities: "In 2022, global equities accounted for 31 percent of our turnover, U.S. equities 28 percent," reports Frank Mohr of Société Générale, a key market maker in ETF trading. For both categories, he reports more buying than selling. "DAX ETFs, on the other hand, accounted for only 6 percent of turnover, with inflows and outflows in equal measure."
German equities? No, thanks!
This picture is also confirmed by asset manager Amundi, which regularly publishes statistics for ETF purchases and sales: of the total 500 billion euros that flowed into equity ETFs worldwide from January to the end of November, North American equities accounted for the lion's share of 290 billion euros, followed by globally diversified equity trackers with 92 billion euros. Emerging market stocks were also popular, with inflows of 75 billion euros. Amundi even reported outflows for the eurozone and Europe as a whole, totaling 14 billion euros.
The money flows for the European ETF market show that there was obviously a lot of skepticism towards Germany: Germany ranks fourth on the list of "top outflows" by country; only Canada, France and Italy were more unpopular. Yet the DAX is not doing badly compared with its peers. It has lost 12.6 percent since the beginning of the year, while the MSCI World has lost 14.5 percent, the S&P 500 20 percent and the Nasdaq 100 as much as 33 percent, at least excluding currency effects.
For Mohr, however, the preference for the MSCI World in particular is primarily a sign that investors* are investing in a diversified manner. "Most have stuck to their savings plans despite the turbulence in the stock market, and they often include MSCI World ETFs."
Mohr
[Translate to English:]
Die Geldströme für den europäischen ETF-Markt zeigen, dass gegenüber Deutschland offenbar viel Skepsis herrschte: Deutschland steht auf der Liste der „Top Outflows“ nach Ländern an vierter Stelle; nur Kanada, Frankreich und Italien waren noch unbeliebter. Dabei präsentiert sich der DAX im Vergleich zur Konkurrenz nicht schlecht. Er hat seit Jahresanfang 12,6 Prozent verloren, der MSCI World hingegen 14,5 Prozent, der S&P 500 20 Prozent und der Nasdaq 100 sogar 33 Prozent, jedenfalls ohne Berücksichtigung von Währungseffekten.
Für Mohr ist die Vorliebe gerade für den MSCI World allerdings vor allem ein Zeichen, dass Anleger*innen diversifiziert investieren. „Die meisten haben trotz der Turbulenzen an der Börse an ihren Sparplänen festgehalten, und die enthalten oft MSCI World-ETFs.“
Energy and utilities stocks a big hit
In terms of sectors, Lang & Schwarz reports particular interest in energy and utility ETFs this year. "In addition, of course, gas and oil ETCs were extremely sought after," notes Andreas Schröer. At Société Générale, technology stocks led the way this year, followed by energy, financial and healthcare stocks.
Energy stocks as winners According to Morningstar, global energy stocks performed best in the sector comparison this year (until the end of November): They gained 52 percent. In second and third place, far behind, were utilities, up 5.4 percent, and defensive consumer stocks, down 5 percent. On the losing side are communications (down 24.5 percent), technology (down 19 percent), consumer cyclicals (down 18 percent) and real estate stocks (down 15 percent).
Thematic ETFs: Niche, but on track for growth
At the same time, theme ETFs were increasingly in demand. They are dedicated to a major future trend, regardless of sector. "In the ten years to mid-2022, their share of global equity fund assets tripled from 0.8 to 2.2 percent," Morningstar explains in an analysis. Europe is currently the largest market for themed funds, with a 55 percent share of the global total, he said.
According to Mohr, investors in 2022 were particularly interested in renewable energies, including solar energy, cyber security and future mobility.
The largest of the thematic ETFs is iShares Global Clean Energy (IE00B1XNHC34), which is worth more than 6 billion euros. After a rapid price increase in 2020, investors had to absorb price losses in 2021, and the trend went sideways in 2022.
ESG is here to stay, active ETFs more in demand
The trend toward sustainable ETFs has continued this year. "What is being bought most are ESG or SRI variants of the major indexes such as MSCI World and S&P," Mohr reports. He estimates that ESG and SRI variants now account for a quarter to a third of sales in an index. "In MSCI World, for example, we're at 25 to 30 percent."
Active ETFs also have a growing following, accounting for 3 percent of fund flows year-to-date, according to JP Morgan Asset Management (AM). The current largest issuer of active UCITS ETFs said active ETFs could play to their advantages in a challenging environment in 2022. And demand will only increase, he added: According to the issuer's Future Focus survey, 51 percent of professional investors in Europe expect to increase their allocation to active ESG ETFs over the next five years.
Government bonds: "Interest picks up steam"
Bond ETFs accounted for about one-third of trading volume at Société Générale over the year. Amundi also reported inflows here, of 221 billion euros worldwide. Here, most of the money went into government bonds (154 billion euros). Corporate bonds accounted for 40 billion, and mixed ETFs ("aggregate") for 34.5 billion euros.
At Société Générale, inflation-linked bonds top the turnover lists for this year, followed by corporate bonds and then government bonds. "However, we see that interest in government bond ETFs has picked up steam with higher interest rates in recent months."
More than 2,000 ETFs tradable Deutsche Börse's ETF segment has continued to grow strongly this year. In mid-December, the important mark of 2,000 ETFs tradable on Xetra was surpassed, and the number now stands at 2,002, meaning that the ETF product offering remains the largest of all European exchanges.
As a reminder, the first ETFs were listed on Xetra in April 2000, and the 1,000 ETF mark was reached in August 2012. The average monthly trading volume of around €19 billion also makes Xetra the leading trading venue for ETFs in Europe. This year, 273 ETFs were newly listed. This means that 2022 is already the year with the highest number of newly admitted products since the ETF segment was launched.
ETNs: More Nasdaq with leverage than cryptos
In ETN trading, Lang & Schwarz's Schröer has noticed a significant increase in interest in leveraged ETNs, long and short, especially on the Nasdaq (IE00BLRPRL42, IE00BLRPRJ20). "ETNs are apparently being used here instead of certificates."
Meanwhile, trading in crypto ETNs has been quiet. "My impression is that it has become less and less month after month," Schröer explains. "The air is completely out." Bitcoin had fallen from its all-time high of $68,764 in November 2021 to below $16,000. Currently, the cryptocurrency is traded at 16,877 US dollars. Unlike ETFs, ETNs are not special assets, but in principle debt securities and as an investment are associated with the risk that the issuer could default as a debtor.
by Anna-Maria Borse, 27 December 2022, © Deutsche Börse AG
Anna-Maria Borse is a finance and economics editor specializing in financial markets/stock markets and economic topics.
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