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NEWSLETTER | 27 Jan 2023

Multifactor ETFs are the ‘Avengers’ of the universe

Gill Wadsworth reported on Morningstar’s Alan Tang’s January report on multifactor ETFs this week, with Tang drawing the analogy that only by employing the correct combination of factors in a multifactor ETF strategy can investors hope to achieve success; ‘much like a collective might of the Avengers is more likely to overcome a super villain than simply relying on Iron Man alone.’

Both Amundi and Invesco published their review of European ETF assets from 2022 this week, with slightly varying inflow figures with Amundi noting that ESG ETFs received much of the attention, particularly ESG fixed income, and Invesco noting that fixed income ETFs enjoyed a good year generally across Europe.

Cerulli Associates brought out a research note this week that listed the number of metaverse ETFs and their increased popularity with investors, even if some of them aren’t quite sure what the metaverse is. What it definitely is, is the fastest-growing sub-theme in terms of number of funds launched, according to the firm, with Quantology launching the first metaverse UCITS fund in Europe in June 2021 and last year several large fund providers launching such funds of their own.

Around a dozen open-end funds and ETFs are targeting the metaverse in Europe, with combined assets under management (AUM) of USD98 million as of January 2023, according to Cerulli Associates, with total AUM exceeding USD100 million in November last year.

Globally, there were 59 metaverse funds as of December 2022, including 35 sub-theme metaverse ETFs. In Europe, some of the biggest ETF providers, including Fidelity, Franklin Templeton, and Legal & General launched funds in 2022, Cerulli says. Most recently, iShares, launched its ETF in December 2022.

"Providers are looking to position themselves for what is expected to be the next big trend," says Fabrizio Zumbo, director.

Service provider nominations in the ETF Express European awards close today and from Monday voting opens for both the ETF issuers, as provided by Trackinsight, and our shortlisted ETF service providers. Good luck to everyone.

Beverly Chandler, Managing Editor

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Companies in this issue

Amundi
Cerulli Associates
Invesco
Morningstar

Amundi reports that 2022 came as the fifth best year for ETFs on record flow-wise in Europe, with assets under management now standing at EUR1.24 trillion. ETFs have enjoyed a 17 per cent annual growth over the last decade, the firm says.

While the challenging market environment reduced the pace of inflows, European ETFs still raised USD87 billion of net new assets (NNA) in 2022, according to Invesco’s inaugural European Demand Monitor. The firm writes that the flows, however, were not sufficient to offset market moves, with total AUM declining by USD192 billion (11.9 per cent) to USD1.42 trillion.

Comparing multifactor ETFs to the popular Marvel Avengers series may seem a bit of a stretch but recent analysis from Morningstar suggests the investment strategies have more in common with the superheroes than might be immediately apparent.