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European-domiciled ETF flows remained in positive territory in December in spite of a sell-off in risk assets during the month. The ETF market saw inflows of $5.9 billion in December, with equity ($4.2 billion) and fixed income ($2.6 billion) products both contributing to overall inflows. Commodities ETFs (-$854 million) detracted from total flows.
For 2022 overall, ETF inflows reached a total of $89.0 billion of net new assets. Equity products proved the most popular with investors, netting $59.3 billion of assets, followed by fixed income ETFs, which took in $39.2 billion of new money. Commodities registered a negative year with -$3.9 billion of net outflows.
Within equities, core strategies were the largest contributor to inflows in December, taking in $1.9 billion of flows. Of this, world ($1.5 billion) and global ($466 million) exposures accounted for the greatest inflows. Core eurozone (-$231 million) and Japan (-$208 million) exposures suffered outflows, however. Smart beta strategies gained $1.3 billion, reversing the outflows seen in November, with United States exposures ($1.1 billion) taking the lion’s share of the inflows. Sustainable ETFs also saw net inflows during the month of $1.1 billion, led by emerging market ($915 million) and world ($588 billion) products, while US sustainable ETFs saw outflows (-$982 million). Sector (-$478 million) and theme1 (-$144 million) exposures experienced outflows during the month. Sector ETF outflows were largely attributable to redemptions from United States (-$389 million) products, while world sector building blocks gained net assets ($156 million). Outflows from theme ETF were mainly driven by redemptions from world (-$29 million) and global (-$87 million) exposures.
In fixed income, total inflows of $2.6 billion were primarily driven by new investments into corporate ($1.4 billion), aggregate ($980 million) and high-yield ($791 million) bond exposures. Within corporate bond ETFs, eurozone ($690 million) and United States ($338 million) strategies were the main drivers of inflows. Aggregate fixed income ETF inflows mainly went into global ($529 million) and emerging market ($253 million) products. High-yield bond ETF demand was mostly for global ($424 million) and eurozone ($276 million) exposures. The largest detractors amongst fixed income ETF segments were sovereign debt ETFs, which suffered -$513 million of redemptions in December. Government bond ETF outflows were driven by investor withdrawals from China (-$508 million), eurozone (-$582 million) and Germany (-$649 million) products. These outflows more than offset demand for United States ($637 million), emerging market ($345 million) and UK ($334 million) government bond ETFs. Floating-rate bond ETFs saw outflows of-$322 million, of which United States exposures accounted for -$294 million.
Commodity ETFs faced redemptions of -$854 million in December, mainly fuelled by outflows from broad (-$332 million), precious metals (-$183 million) and ex-agriculture (-$164 million) commodity exposures.
In December, the Vanguard UCITS ETF range captured net inflows of $1.5 billion. Flows were split between Vanguard’s equity UCITS ETF range ($993 million) and fixed income UCITS ETF range ($500 million). For the full year, $9.3 billion of investor flows went into the Vanguard equity UCITS ETF range, while Vanguard fixed income UCITS ETFs gained $2.9 billion of new assets.
Of the $9.3 billion of flows into Vanguard’s equity UCITS ETF range, the Vanguard FTSE All-World UCITS ETF gained $191 million of net new assets, followed by the Vanguard FTSE 250 UCITS ETF ($143 million), the Vanguard Developed Europe UCITS ETF ($137 million), the Vanguard S&P 500 UCITS ETF ($128 million) and the Vanguard FTSE All-World High Dividend Yield UCITS ETF ($111 million).
Flows of $500 million into the Vanguard fixed income UCITS ETF range went primarily into the Vanguard EUR Eurozone Government Bond UCITS ETF ($119 million). The Vanguard USD Corporate Bond UCITS ETF ($104 million), the Vanguard ESG Global Corporate Bond UCITS ETF ($62 million) and the Vanguard USD Corporate 1-3 Year Bond UCITS ETF ($54 million) also contributed to inflows.
1 Source: ETFbook, as at 30 December 2022. The ‘theme’ category includes ETFs that invest in investment themes such as energy and environment, infrastructure, health and society, financial evolution and disruptive technology.
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.
Past performance is not a reliable indicator of future results.
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 at https://global.vanguard.com.
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