In its European Demand Monitor report, Invesco reported that total AUM for ETFs had fallen to $1.42trn, representing a $192bn decline or 11.9% drop.
Meanwhile, ESG ETFs accounted for 61% of net new assets, at $53bn in 2022, meaning that ESG ETFs now represent over 16% of European ETF AUM.
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2022 was a strong year for fixed income, as fixed income ETFs saw $33bn in inflows with a market fall of $53bn. US treasuries led this category, with $20bn in net new assets, wile Chinese bond ETFs were the biggest losers with $11.3bn of withdrawals.
This compares to equity ETFs, which experienced $59bn in inflows with market moves leading to a $220bn drop. The $59bn in inflows also represented a 58% drop from the record $141bn seen in 2021.
Amongst equities, global equities saw the strongest inflows by far, representing 47% of all equity inflows at $27.9bn. US equities came second at $15.7bn, with emerging market equities third at $7.5bn.
Meanwhile, commodities were the only asset class for ETFs that saw positive returns, at 1%, however outflows of $5bn meant that overall assets fell by 3.1% throughout the year.
Commodities were the only asset class with positive returns, at 1%, but outflows of $5bn left overall assets down by 3.1%.
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Gary Buxton, head of EMEA ETFs at Invesco, said: “Having sold off heavily last year, many asset classes start 2023 with much more favourable valuations than at the start of last year. Looking ahead, we should see a more supportive backdrop for financial markets, and therefore ETF flows.
“The economic outlook is likely to maintain investor focus on large, liquid core exposures in equity markets such as world or US equities in the near term.
“Similarly, with fixed income yields hitting the best levels for a decade towards the end of last year, investors are likely to be able to achieve their yield targets through government and investment grade markets rather than having to take on additional risk.
“Unlike equity and fixed income returns, commodities held up relatively well last year which could put them on the back foot with investors at the start of 2023.”
He said: “Gold rallied into year-end and has continued to do so at the start of this year, but without the catalyst of spiking inflation or heightened geopolitical tensions, demand may be subdued in the near future.”
