Uncertainty in global markets causes fund launches to slow

This report aggregates newly launched funds in August and highlights the performance of the funds launched in July.

• August adds 33 new ETFs, a significant decrease from the prior month of July
• 30 funds were launched in the Americas while just three funds were added in Europe
• 13 of the 33 ETFs added utilise a currency hedge

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August new listings

The low number of ETF launches in the month of August coincided with the lowest monthly inflows into ETFs globally since October of 2014 and several consecutive days of market turmoil on the back of falling Chinese equities. ETF issuers have a back log of funds with varying strategies waiting until the market shows enough of an appetite to launch. This allows ETF providers to avoid issuing a fund while the market is in a downturn.

A large portion of funds issued in August use a currency-hedged strategy. While ETF issuers are expanding into foreign markets, the safe or popular bet still appears to be the US dollar.

Value stocks and high dividend paying equities also played a major part in the strategies of several ETFs issued last month. Deutsche Bank, O'Shares and Compass ETF all added funds that look to benefit from dividend paying stocks.

July flows

Despite July having the largest number of ETFs launched this year, with 58 new listings around the globe, the newly listed funds drew minimal investor attention with gains of just $564m since their inception.

The majority of the funds added in July focused on US investments or at least hedged their portfolio against the US dollar. The US market saw significant downturn and uncertainty during the month of August which may have played a part in the lacklustre performance of the funds added in July.

The funds launched in the Americas earned a total of $390mn of inflows since their inception. iShares Currency Hedged MSCI Italy ETF (HEWI) gained a total of $87mn.

In Europe, the Ossiam Shiller Barclays Cape US Sector Value TR ETF (UCAP) saw over $100mn added to its assets under management as European investors looked to add US value stocks to their portfolios. European listed funds brought in a combined $172mn since launching in July.

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James Hohorst, ETF Analyst, Markit
Tel: +1 646 679 3012
james.hohorst@markit.com

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This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.