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ETF investors face hangover after 2015 binge buying

European equity ETFs saw record inflows in 2015, according to Morningstar data. However, it has now turned out ETF investors only joined the party once the happy hour was over. Investors who put their money into a MSCI Europe ETF a year ago are now having to cope with a loss of 12.4%.


PA Europe

ETF investors know timing is crucial for success. However, they proved in recent years they do not quite yet master this art. They put in an unprecedented €33.3bn into European equity ETFs in 2015 after the asset class had provided handsome returns in the three preceding years.

However, ETF investors were notably absent from the European equity market in the three preceding years. They only put in a net €2.6bn in 2012 and 2013 combined, but again pulled out that same sum in 2014.  


Mutual fund investors timed their investments slightly better, putting in almost €7bn in net new money in 2012 and 2013 combined. However, these inflows were dwarfed by those in 2015, which were exactly the same as net inflows into ETFs at €33.3bn.  

Inflows continue in January

I’m not sure this analogy sounds familiar to you, but according to an ETF research report published by Blackrock this week, ETF investors just keep buying expensive drinks at the bar though they actually should already have called it a day and gone to bed. In January, European equity ETFs gathered another $2.4bn (€2.1bn) in net inflows globally. Japanese equity ETFs actually saw even higher inflows of $5.2bn.

So it seems ETF investors are trying to postpone their hangover by extending their drinking session. Or maybe they are just counting on doctor Draghi to provide them with a glass of water and a couple of aspirins.