Amid growing concerns that the aggressive stimulus policies will fuel a spike in inflation, exchange traded fund investors have been dumping fixed income assets.
February 4, 2021
As more investors crowd into socially responsible investments, some are warning of a potential bubble forming in the environmental, social, and governance exchange traded fund category.
ESG-related ETFs attracted a record $85 billion across the U.S. and Europe over 2020, and the funds are still raking it in, Bloomberg reports. As more money flowed into these strategies, stocks in many of these funds are now trading at elevated price-to-earnings multiples that are increasingly hard to justify.
“There is a risk that holdings that populate ESG funds have become overvalued,” Chris Dyer, director of global equity at Eaton Vance, told Bloomberg. “Investors – both active and passive – are increasingly chasing these themes and driving valuation to uncomfortable levels in some cases. This type of naïve investing tends to end badly.”
European Investor Flows Reveal a Pickier Mindset with ETF Plays December 23, 2020
European exchange traded fund investors dumped S&P 500 exposure for the more technology-heavy Nasdaq-100 and a number of sector picks, like those that track so-called sustainable indices.
According to Invesco data, in the six years ended 2019, 59% of the $91 billion of net new money European ETF investors pumped into U.S. equities went into those that tracked the S&P 500, the Financial Times reports.
However, we witnessed a shift in preferences over the first 11 months of the year as Europeans yanked a net $7.8 billion from ETFs tracking the S&P 500, but they funneled $17 billion into ETFs based on other U.S. equity indices.