$12bn wiped off ETPs last week but YTD flows are strong

European ETPs suffered from the market downturn last week, which knocked €12bn off assets but the cash flows tell a more positive story.

The decline in developed market equity indices over the past couple of months has affected assets; this is not the only time a large amount has been wiped off ETP AUM in recent weeks. But this is not the full picture, according to Deutsche Bank.

"The most important thing in terms of assets in ETPs is not just the AUM, it's the flows. The cash flows give you a true indication of investor interest. We have had $114bn of flows globally [year-to-date]," says Christos Costandinides, European head of ETF research and strategy at Deutsche Bank.

Given the fact that some equity markets are down 20% or more year-to-date, it has had an effect on the assets in ETPs - which Deutche categorises as ETFs and ETCs, ETFs make up the majority of this. However, overall the ETP market has seen growth.

"The first and the second quarter of this year are much stronger than the first and second quarter of last year, we are about 1.5 times higher in terms of cash flows - the growth is there," says Costandinides.

In the third quarter flows have slowed in the US and Europe, which has been driven by equity market volatility and uncertainty, he says.

"Let's not forget that investors make decisions based on what asset class views they have and because volatility has increased so much since end of July, that's had a pronounced impact on the equity market ETF investing."

Costandinides adds that although there have been massive outflows from some equity ETFs, others have seen inflows, notably Dax ETFs which have had flows of $11.1bn YTD.

Last week, European ETPs saw net outflows of €683mn after most European equity benchmarks ended the week lower, Deutsche reports.

Fixed income had outflows of €342mn, equity ETFs had outflows of €298mn. Most of the inflows were in developed non-European ETFs, the majority in those providing exposure to Japan.

Total European ETP assets decreased by 5.5% and ended the week at €218.5 billion.