Investors Flee European ETFs

European equity funds saw their biggest outflow ever last week as investors pulled $5.7 billion from the asset class. The move should not be surprising considering the slowing growth in the region and concerns that yet another recession could grip several countries. Add in the fact that investors are losing confidence in the European Central Bank (ECB) to spur growth and avoid a deflationary scenario and the strategy has been to sell first, ask questions later.

Several of the broad-based European ETFs have been hit hard over the last few months and last week only exacerbated the declines for the year.

The SPDR EURO STOXX 50 ETF FEZ tracks 56 European companies, with France at 36 percent and Germany at 31 percent being the most heavily weighted countries. The top individual companies include Total SA TOT with a 5.6 percent holding, Sanofi-Aventis SNY at 5.2 percent, and Bayer AG making up 4.6 percent of the portfolio. The fund is currently down 9 percent over the last 12 months, and down 14 percent over the last six months. EZU has been struggling to find a bottom as it hit a new 15-month low this week. The fund has an average expense ratio of 0.28 percent.

The Vanguard FTSE Europe ETF NYSE: (VGK) follows 527 publically traded companies across 11 European countries. The United Kingdom at 33 percent, France at 14 percent, and Switzerland with 14 percent allocation are the most heavily weighted countries in the ETF. The top individual holdings are Nestle SA at 2.8 percent, Novartis AG NVS coming in at 2.3 percent, andHSBC Holdings PLC HSBC with a 2.3 percent holding. VGK has struggled of late along with the other Europe related ETFs it is currently down 8 percent over the last 12 months and down 13 percent over the last six. It has a very favorable expense ratio of 0.12 percent.

The iShares Europe ETF IEV consists of 335 companies spread across 14 countries, easily making it one of the most diverse European ETFs on the market along with VGK. The United Kingdom at 27 percent and Switzerland at 15 percent are the highest weighted countries in the ETF. The top individual holdings include NVS with a 3 percent holding, Nestle SA at 2.9 percent, and Roche Holding AG making up 2.6 percent of the fund. IEV has performed very similar to the ETFs mentioned above; it is down 8 percent over the last 12 months and down 13 percent over the last six. The fund has an expense ratio of 0.60 percent.

Overall it has been a tough year and an even tougher six months for all European ETFs. However, from a contrarian viewpoint the massive shift out of the region’s ETFs could be a signal the bottom is near as investors overreact to the downside.