UK ETF investors abandoning FTSE 100 in favour of global indexes

Investors withdrew more than $400 million from exchange-traded funds (ETFs) based on the UK benchmark FTSE 100 index in the first quarter of 2010, switching to ETFs based on the iShares MSCI Emerging Markets, S&P 500 and Eurostoxx 50 indexes, according to BlackRock's first UK Industry Review.

The leading ETF on the London Stock Exchange (LSE) at the end of the first quarter of 2010 was the iShares S&P 500, which has assets under management (AUM) of $7.25 billion, followed by the iShares Eurostoxx 50, which has $5.69 billion in AUM.

The same period saw outflows of $439.1 million from the iShares FTSE 100 ETF, which has the third-highest AUM of $5.29 billion.

Next in line in terms of AUM are the iShares € Corporate Bond and the db x-trackers MSCI Emerging Market TRN Index ETFs. But despite the popularity of the iShares Eurostoxx 50 ETF, the db x-trackers ETF on the same index saw outflows of $55.7 million during the first quarter.

Assets in UK-listed ETFs increased by 5.8% in the first quarter of 2010, compared to a 1.5% fall in the MSCI UK Index in US dollar terms. Twenty new ETFs were listed on the LSE during the same period, taking the number of unique ETFs (ETFs on the LSE can be listed in multiple currencies) to 236, with assets of $49.8 billion.

However, average daily trading volumes during the quarter were down 12.6% to $302.3 million.

iShares lists more ETFs on the LSE than any provider, with 90 unique listings and $47.6 billion in AUM for its primary listings at the end of Q1 2010. Lyxor Asset Management is next with $958.1 million in AUM, followed by Marshall Wace Asset Management with $400.7 million.

Overall, AUM on the exchange has increased from $47.11 billion in 2009 to $49.82 billion at the end of the first quarter this year. These figures represent a massive increase from 2005, when AUM stood at just $6.47 billion.

Recent research from Barclays Stockbrokers in the UK suggests that emerging markets will remain popular for the rest of the year, with 50% of stockbrokers believing they will provide the best returns.

Despite Blackrock's figures showing investors pulling out of the UK, 31% of Barclays Stockbrokers think the UK will provide the best returns this year, and 14% think the US will be the best bet, with 5% favouring Europe.