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Synthetic intelligence-focused and massive knowledge funds represented greater than half of inflows into European thematic trade traded funds this yr, based on knowledge from Morningstar.
The class attracted internet inflows of €510mn within the six months to the tip of June, after posting €60mn in outflows final yr. The inflows signify 53 per cent of the €960mn introduced in by all thematic ETFs in Europe.
The rising curiosity in AI has additionally been seen in open-ended mutual funds, albeit to a lesser extent, with the AI and massive knowledge theme the third best-selling with €220m of inflows.
This got here regardless of thematic mutual funds and ETFs as a complete having outflows of €510mn, after posting inflows of €1.3bn final yr and €101bn in 2021, based on the info.
Kenneth Lamont, senior supervisor analysis analyst for passive methods at Morningstar, mentioned AI and massive knowledge had arguably been the primary theme animating world fairness markets this yr.
“The unprecedented mass adoption of generative AI options equivalent to ChatGPT has rippled by markets and benefited firms linked with that theme,” he mentioned.
US know-how firm Nvidia, which dominates the marketplace for chips utilized in AI programs, had greater than tripled in worth for the reason that flip of the yr, Lamont added.
“This new enthusiasm for what’s a comparatively mature theme is mirrored within the appreciable internet inflows into thematic ETFs this yr,” he mentioned. “Few would argue that generative AI is more likely to rework our lives to 1 diploma or one other, however precisely who the true winners of this variation will likely be stays removed from sure.”
Nevertheless, he argued that the dangers related to choosing a single winner might be mitigated by shopping for a basket of shares uncovered to that theme, within the type of an ETF.
The highest 9 performing thematic funds within the first half of this yr had been targeted on the theme of technological shifts, based on a report by WisdomTree.
“It’s doubtless these themes benefited from the rise of generative AI and related tailwinds,” the report mentioned.
Regardless of the expansion in synthetic intelligence ETF flows, total thematic ETF flows have fallen this yr.
Ralph Williams, affiliate director at Broadridge, mentioned thematic ETFs had “misplaced a few of their shine” when rates of interest entered their “mountain climbing cycle”.
“Excessive progress shares, that are delicate to rate of interest rises, constituted quite a few key holdings [in thematic ETFs],” Williams mentioned.
“Urge for food has additionally been undermined by lowered [environmental, social and governance] efficiency, greenwashing fears and regulatory uncertainty,” he added.
He argued the earlier success of thematic ETFs was partly as a consequence of buyers benefiting from pandemic-related themes, most clearly within the know-how, life-style and medical sectors.
“Underlying every thing, nonetheless, was the simultaneous 2021 surge in ESG shopping for, which boosted each specific ESG and non-explicit ESG themes, due to the sturdy overlap between accountable investing and thematic outlooks,” he mentioned.
In the meantime, conventional mutual funds proceed to dominate the European thematic funds area, accounting for 90 per cent of belongings, based on Morningstar knowledge.
“Not like within the US, the place thematic ETFs dominate, thematics in Europe stay a historically actively managed story,” Lamont mentioned.
The majority of 2021 and 2022 thematic gross sales went into open-ended mutual funds, whereas 2023 outflows are “marginal” in contrast with earlier inflows, based on Broadridge knowledge.
“ETFs have held up higher, whereas seeing decrease preliminary flows,” Williams mentioned.
“In mixture, although, the longevity argument actually has legs — we now have but to see something resembling an actual sell-off,” he mentioned.
*Ignites Europe is a information service revealed by FT Specialist for professionals working within the asset administration trade. Trials and subscriptions can be found at igniteseurope.com.