Bank of Japan support for ETFs masks outflows across Asia

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Bank of Japan support for ETFs has masked outflows from Asian ETFs, bucking a global trend that has already seen year-to-date inflows across ETF products exceed any other year.

Last August, the Bank of Japan almost doubled its annual ETF purchases from ¥3.3tn to ¥6tn (£42.1bn) as part of its quantitative easing programme. The central bank owned 71 per cent of shares in Japan-listed ETFs at the end of June, Bloomberg data shows.

However, investors have pulled a net $4.8bn (£3.8bn) from non-Japanese Asian funds, IHS Markit analysis released this week reveals.

In contrast, global ETF inflows have totalled $380bn in the year-to-date surpassing the previous annual record of $378bn. Total inflows are forecast to total $500bn by the year end.

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“If this fortune holds true, the industry will notch its largest growth rate in five years,” says IHS Market analyst Simon Colvin.

Fixed income products, particularly corporate bonds, have led inflows attracting $111bn – 17 per cent of total net sales.

In contrast, alternative products, which invest in things like Vix and managed futures, are the only major ETF asset class to register a net outflow with investors pulling $792m from these funds since the start of the year, mostly due to profit taking from the inverse Vix funds.

US investors accounted for $275bn, or 70 per cent, of global inflows.

Fixed income products dominate ETF inflows