ISS Market Intelligence European Research Alert | June 26, 2020

“Coronavirus Concerns” has replaced “US-China Trade Deal” as the catch-all explanation for changes in financial asset values. In the four-day period between 8th-11th June global equity markets dropped 6% as Covid-19 cases spiked in areas across the United States and Latin America. European investors reacted by reducing their equity exposure, particularly to North American equities which saw a €2 billion outflow in the week ended June 17th.

Investors redeemed from equity funds of all structures in the week ended June 17th; €1 billion was redeemed from active equity funds, €1.7 billion from passive equity funds and €555 million from equity ETFs. This was in direct contradiction with bonds which saw net sales inflows of €4 billion into active funds, €1.5 billion for passive funds and €1.9 billion for bond ETFs.

ESG funds continued a positive streak, but at a reduced pace. In the week ended June 17th, ESG funds saw a net sales inflow of €1.4 billion, down from €5.5 billion in the previous week. ESG investors follow a similar trend to the wider market with a bias toward fixed income funds. The average ESG equity fund has outperformed the average non-ESG equity fund by 1.9% YTD according to ISS MI Simfund data. This can be attributed to ESG funds being overweight Technology and underweight Energy, compared to non-ESG funds.

Figure 1: Highest Net Sales Inflow in Five Months (Weekly data in billions of €)

*Data as at June 17, 2020 sourced from ISS MI Simfund.