Industry Voice: Vanguard ETF market review

Flows into European-domiciled ETFs were positive in May despite total net monthly inflows falling by around 46% to $8.2 billion¹. Fixed income ($5.5 billion) and equity ($2.9 billion) products attracted the majority of net new assets, while flows into alternatives ETFs were broadly flat ($7 million) and commodity ETFs saw net outflows of -$283 million.

Within equities, sustainable equity ETFs were the largest contributor in May, generating $2.9 billion in net inflows. The bulk of inflows in this category were spread across world ($898 million), United States ($586 million) and emerging market ($477 million) products, while France (-$167 million) and China (-$52 million) ETFs accounted for the largest outflows. Core exposures were the second-most popular equity ETF category with net inflows of $1.1 billion, which were primarily driven by new investments into world ($1.3 billion), and emerging market ($409 million) exposures, while Switzerland (-$890 million) and Germany (-$436 million) products detracted. ‘Market access'² equity ETFs also saw investor demand in May, recording $315 million of net inflows, with Brazil ($202 million) and China ($91 million) products the largest contributors to flows. Equity sector strategies saw -$631 million of net outflows in May, driven mainly by net outflows from Europe exposures (-$613 million). The equity segment category experienced net outflows of -$409 million, with net outflows from United States (-$195 million) and Germany (-$127 million) products suffering the largest outflows.

In fixed income, government ($2.4 billion), corporate ($1.4 billion) and ultra-short maturity ($1.2 billion) ETFs contributed the most to net fixed income inflows of $5.5 billion, while floating-rate (-$449 million) and inflation-linked (-$103 million) bond exposures continued to detract from total flows. Within government bond ETFs, eurozone ($1.2 billion) and United States ($1.0 billion) exposures led the inflows. Eurozone and United States exposures were the main drivers of corporate inflows as well, with $1.3 billion and $505 million of net new assets raised, respectively. Within the ultra-short maturity bond ETF category, eurozone products ($733 million) contributed the most to net inflows, while in the floating-rate category, eurozone products (-$266 million) led net outflows which totalled -$449 million.

Commodity ETFs saw net outflows of -$283 million, led by outflows from precious metals ($-136 million) and ex-agriculture (-$86 million) exposures.

Vanguard UCITS ETFs

In May, the Vanguard UCITS ETF range captured net inflows of $1.1 billion, with the majority of Vanguard UCITS ETFs recording positive flows. Flows were split between Vanguard's fixed income UCITS ETF range ($644 million) and equity UCITS ETF range ($440 million).

In equities, inflows were led by the Vanguard FTSE All-World UCITS ETF ($200 million) followed by the Vanguard FTSE Japan UCITS ETF ($92 million).

In fixed income, the primary drivers of inflows were the Vanguard U.S. Treasury 0-1 years UCITS ETF ($288 million), followed by the Vanguard EUR Eurozone Government Bond UCITS ETF ($82 million). In the ESG category, our ETF products recorded inflows for $38 million over the month, primarily driven by Vanguard ESG Global Corporate Bond UCITS ETF ($18 million).

This post is funded by Vanguard

¹ Source: ETFbook, as at 31 May 2023.

² Source: ETFbook, as at 31 May 2023. The ‘market access' category includes difficult-to-access markets such as emerging markets.

Important risk information

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.

Some funds invest in emerging markets which can be more volatile than more established markets. As a result the value of your investment may rise or fall.

Investments in smaller companies may be more volatile than investments in well-established blue chip companies.

ETF shares can be bought or sold only through a broker. Investing in ETFs entails stockbroker commission and a bid- offer spread which should be considered fully before investing.

Funds investing in fixed interest securities carry the risk of default on repayment and erosion of the capital value of your investment and the level of income may fluctuate. Movements in interest rates are likely to affect the capital value of fixed interest securities. Corporate bonds may provide higher yields but as such may carry greater credit risk increasing the risk of default on repayment and erosion of the capital value of your investment. The level of income may fluctuate and movements in interest rates are likely to affect the capital value of bonds.

The Funds may use derivatives in order to reduce risk or cost and/or generate extra income or growth. The use of derivatives could increase or reduce exposure to underlying assets and result in greater fluctuations of the Fund's net asset value. A derivative is a financial contract whose value is based on the value of a financial asset (such as a share, bond, or currency) or a market index.

Some funds invest in securities which are denominated in different currencies. Movements in currency exchange rates can affect the return of investments.

For further information on risks please see the "Risk Factors" section of the prospectus on our website.

Important information

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