eThesis - Kauppakorkeakoulun sähköiset gradut

Purpose of the study

The purpose of this thesis is to provide evidence on recent trends in the ETF industry. More specifically, this thesis examines net asset flows on physical and synthetic ETFs from 2010 to March 2015, and clarifies the factors affecting these net asset flows. In particular, the effect of the replication method, securities lending and critical report by IMF in 2011 are taken into account. Furthermore, the thesis compares the net asset flows between mutual funds and ETFs by the asset class.

Data and methodology

The data for the thesis was received from Bloomberg and Lyxor Asser Management, a subsidiary of Société Générale. The data consists net asset flows, replication method, asset class and securities lending on 2054 European domiciled ETFs. In addition, the thesis includes data about European domiciled mutual funds. First, the thesis compares net asset flows between mutual funds and ETFs by asset class. Secondly, regression model is used to analyze the net asset flows to ETFs by asset class. Replication method, securities lending and critical report by the IMF have been treated as dummy variables.

Results

The results show that the European domiciled equity and commodity ETFs have attracted larger net asset flows compared to their mutual fund peers in recent years. However, European domiciled fixed income mutual funds have attracted larger net asset flows compared to fixed income ETFs. The results of the regression model show that the physical ETFs have had a net asset flow premium compared to their synthetic peers in equities, fixed income and commodities between January 2010 and March 2015. In addition, regression models show that the securities lending generates $149.0m monthly premium for equity ETFs, whereas the securities lending premium is $178.2m for fixed income ETFs over ETFs, which do not participate in securities lending. Finally, according to the regression model the critical report by IMF had a positive effect ($486.7m monthly premium) on the net asset flows to physical equity ETFs and negative effect ($ -845.4m monthly premium) on the net asset flows to synthetic equity ETFs.