Flight to quality: Invesco

Invesco’s June European ETF flows snapshot reveals that investors continued to diversify portfolios, with a notable resurgence in fixed income allocations and growing interest in quality equities and commodities.

In June, Invesco writes that European ETFs saw nearly USD24 billion in net new assets (NNA), bringing year-to-date inflows to over USD164.1 billion, as markets digested rate and geopolitical signals.

Key trends this month:

Equities:

Equities accounted for half of all flows (USD12 billion), with strength picking up late in the month as the S&P 500 and Nasdaq hit record highs.

Global equity ETFs led (USD5.2 billion), followed by Thematic (USD2.7 billion), US (USD2.1 billion) and EM (USD2.0 billion).

Thematics equity ETFs were led by defence-themed ETFs following NATO’s commitment to increase spending, Invesco writes.

Amid slower growth and elevated rates, investors focused on quality companies with stable earnings and low levels of debt.

Fixed Income:

Strongest month since July 2024, with USD8.9 billion in flows (37 per cent of total).

Investors favoured European government and corporate bonds but also showed growing interest in sectors that would generally benefit from a stronger economic climate, including High Yield and EM debt.

Investors allocated heavily to Investment Grade and High Yield credit (USD7.7 billion), with 40 per cent of this going to ESG funds, as they refocus on the energy sector amid ongoing tensions in the Middle East.

Commodities:

Demand for precious metals picked up, with Invesco writing that the commodity asset class saw USD3 billion of NNA as investors sought a hedge against the still-uncertain economic outlook.