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Strong demand for European equities

11 June 2014


European ETFs on track to post record year in AuM following ECB's interest rate cut

Read more: ECB Markit Fiat TUI

The 641 European equity-exposed exchange traded funds (ETFs) are on track to post a record jump in assets under management (AuM) after having seen $20.2bn of new inflows in the first five months of 2014, according to a new report by Markit.

Strong appetite for European equities from North American investors, potentially caused by the recent interest-rate slash, means the asset class is well on track to beat 2008's total inflow, when these funds added over $28bn of new assets over the enitre year.

"The 61 North American listed European funds have experienced nearly two thirds of the total inflows," said Simon Colvin, analyst at Markit.

"While it's hard to link the recent appetite for European assets to the central bank [ECB], last year's strong easy money rally in North America drew similar inflows into the region's assets."

Earnings before interest, taxes, depreciation, and amortisation (Ebitda) to price has been the best performing factor in Europe. The best-ranked companies have outperformed the worst ranked by 2.6% on average in the first five months of the year.

Value shares have generally managed to outperform their low-value peers, with companies like Fiat and TUI scoring well.

The recent rally on European shares, which Markit compared to the US rally last year, has not put off investors. But by contrast, European investors still seem wary of the value embedded within their investment. said Colvin.

"This could change however, should the ECB decide to ease even further, prompting investors to go for higher yielding lower value assets," he added.


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