We spoke about weakness in the Euro currency earlier this week and benchmark ETF FXE (CurrencyShares Euro, Expense Ratio 0.40%) continues to sink this morning, trading at its lowest levels since the fall of 2013.
It seems that there are some doubters in terms of European Equities at these levels as well as some of the ETF leaders in terms of net outflows recently include some well-known Europe Equity based
products.
We see some redemption pressure in the two largest ETFs in the category, VGK (Vanguard FTSE Europe, Expense Ratio 0.12%) and EZU (iShares MSCI EMU, Expense Ratio 0.50%) this week, and it is especially worth noting given the recent Euro weakness and going into an uncertain weekend. From a benchmark standpoint, European equities have greatly lagged their U.S. counterparts in year to date performance, with EZU for example counting today’s showing actually net “down” now for the year, and with VGK barely eking out YTD gains.
From a country exposure standpoint, EZU is heaviest weighted to France (>30%), Germany (>27%), Spain (>11%), and the Netherlands (>9%) while VGK not being “EMU” tied, also has exposure to the United Kingdom (>31%) in addition to the aforementioned countries and others in Europe. FEZ (SPDR DJ Euro STOXX 50, Expense Ratio 0.29%) is also an important ETF to watch in terms of being a barometer of how the European equity market is doing, as the fund tracks fifty Mega-Cap European based equities of the likes of Total SA, Sanofi, Banco Santander SA, Bayer AG, and Siemens AG for example.
VGK and EZU hold $16.7 billion and $10.3 billion respectively in terms of assets under management, while the next largest funds in the category line up as the following: FEZ ($5.6 billion AUM), EWG (iShares MSCI Germany, Expense Ratio 0.51%, $4.8 billion AUM), EWU (iShares MSCI UK Index, Expense Ratio 0.51%, $4.3 billion AUM), IEV (iShares S&P Europe 350, Expense Ratio 0.60%, $3.6 billion AUM), EWP (iShares MSCI Spain, Expense Ratio 0.51%, $2.4 billion AUM), and HEDJ (WisdomTree International Hedged Equity, Expense Ratio 0.58%, $2.1 billion AUM).
Looking at the size of these funds it is clear there is considerable institutional and retail ETF investment interest in “Long” Europe equity products as there is a rather robust list of another dozen or so funds that have anywhere from $150 million to $1.8 billion in AUM currently.