Investors Head for the Exits on European ETFs

Globe on EuropeAccording to S&P Global Market Intelligence, investors yanked $6.4 billion from the 10 biggest U.S.-listed Europe ETFs in June and July, as Brexit fears caused a mass exodus away from the EU region.

From the Wall Street Journal:

“Brexit fears have caused a continuation of money moving out of Europe,” says Todd Rosenbluth, director of ETF and mutual fund research at S&P Global Market Intelligence. “We saw it in the beginning of the year as investors favored U.S. equities and got concerned about the economic prospects in Europe, and it has accelerated.”

Some funds have been hit worse than others, and VGK is at the top of the list.

The $11.7 billion Vanguard FTSE Europe ETF experienced outflows of $1.5 billion in June and July, and $2.6 billion this year through July, S&P Global Market Intelligence says. Financials are the fund’s largest sector holding, accounting for 19% of its assets, including HSBC Holdings PLC, which is among its top 20 positions, according to S&P.

While others have fared better:

Across the board, the Europe story as an investment theme lost some of its luster with the surprising Brexit vote, says Christopher Gannatti, associate director of research at WisdomTree Investments Inc. But Europe Hedged Equity Fund’s performance since the initial Brexit-related correction has been quite good, he says.

“It’s not as though we’re looking at HEDJ, and seeing a severely negative year,” he says.

Despite the big outflows from the funds, many of the indexes they track have actually recaptured their pre-Brexit highs recently. That indicates that Brexit fears have largely dissipated, with investors perhaps feeling that only Britain still faces substantial hurdles. Plus, the true consequences of the Brexit won’t be fully realized for several years.

The Vanguard FTSE Europe ETF (NYSE:VGK) rose $0.41 (+0.84%) in Thursday afternoon trading to $49.03. VGK, which is the largest European-focused equities fund by assets under management, has fallen about 1.7% year-to-date.


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