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