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European-domiciled ETFs enjoyed a strong 2020, gathering $118 billion of net inflows, almost matching the 2019 number ($125 billion). Although, compared to a year earlier, the quantum was not too different: the top two drivers of those flows swapped places as equity accounted for 54% of 2020 net inflows ($63.6 billion) while fixed income captured 32% of overall flows ($38 billion). Commodity exposures picked up $15.9 billion, mainly driven by gold exposures as the precious metal reached all-time highs exceeding $2,000 per ounce for some time earlier in the year.
The evolution of flows into ETFs reflected performance and market sentiment throughout the year. After a strong January and muted but still positive flows in February, we saw an unprecedented $23 billion of net outflows in March as markets collapsed. That was also the time when precious metals exposures started to enjoy massive net inflows as investors looked for relative safety.
Once the situation stabilized, we initially saw strong flows into fixed income exposures and a continuation of flows into precious metals in Q2. The second part of the year, however, was marked by a spectacular comeback for equities, which posted $63 billion of net inflows since July, fueled by rallying equity prices. Vaccine news accelerated this flow trend and also triggered some outflows from precious metals as markets went strongly risk on.
Figure 1: Net Inflows of European-Domiciled ETFs in 2020