Biggest Europe Stock ETF Had Such an Awful Year Only Once Before

(Bloomberg) -- In the 13 years of its existence, just once has the largest European stock exchange-traded fund bled cash this badly.

The Vanguard FTSE Europe ETF has given up $2.16 billion in outflows this year, the second-worst year of redemptions since the fund’s launch in 2005. Only 2016 saw a faster exit by investors, according to data compiled by Bloomberg.

This mirrors EPFR Global’s regional flows data, which show that European equity funds have lost about $80 billion this year, the heaviest selling since 2016 and the biggest retreat among major regions in 2018. Investors have fled European stocks to escape political uncertainty surrounding Italy and Brexit and as disappointing earnings captured just a fraction of the boom in U.S. profits.

“It’s been very much a year to forget for European investors,” said Andrew Koch, a fund manager at Legal & General Investment Management in London. “At the start of 2018, investors had been looking towards European stocks, hoping for politics to be uneventful, so that economic growth in Europe could accelerate and corporate profits grow. In reality there have been disappointments through the year.”

The Stoxx Europe 600 Index is poised for a decline of 13 percent this year, the biggest annual drop since 2008, when the financial crisis engulfed markets. A survey of major fund managers by Bank of America Merrill Lynch showed that investors are the most bearish on euro-zone equities in six years and their positioning in the region’s equity market this month dropped to underweight for the first time since December 2016.

To contact the reporter on this story: Ksenia Galouchko in London at kgalouchko1@bloomberg.net

To contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, John Viljoen, Jon Menon

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