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BlackRock ETP Landscape - Global ETPs fLows accelerate ahead of 2015 pace as emerging markets climb to record territory

Global ETPs brought in $39.8bn in August driving year-to-date flows ahead of 2015 pace on strength in emerging markets (EM) and U.S. equities as well as EM debt and investment grade corporate bonds...

  • Broad EM equities gathered $6.2bn and EM debt funds collected $1.9bn with both categories on record year-to-date pace amid a leveling of commodity prices and a weaker U.S. dollar
  • U.S. equities generated inflows of $16.6bn focused in large caps and with strong flows to dividend-weighted and preferred stock strategies as investors search for income
  • Fixed income collected $11.6bn driven by investment grade corporate bonds with $5.0bn, which are also on record year-to-date pace, as investors show preference for higher-yielding categories

Global ETPs gathered $39.8bn in August bringing year-todate flows to $213.4bn, ahead of 2015’s record-setting pace. Similar to July, investors favored U.S. and emerging markets (EM) equities as well as EM and corporate debt.

Broad EM equity funds maintained momentum collecting $6.2bn, marking a third consecutive month of inflows, amid a leveling of commodity prices and a weaker U.S. dollar. The category remains on record pace with $22.9bn year-to-date. U.S. equities held course with inflows of $16.6bn including large caps with $7.3bn. Equity income-generating strategies gathered assets against the backdrop of low and negative yields globally: Dividend-weighted funds brought in $1.4bn and preferred stock funds added a monthly record $1.1bn and year-to-date gains of $5.2bn already exceed last year’s record flows. This same backdrop of low yields also benefited gold miners which saw inflows of $1.8bn.

EM debt funds saw inflows with $1.9bn in August. Year-todate flows to the category are $12.7bn surpassing the 2012 full-year flow record of $8.3bn. Investment grade corporate bond funds drew in $5.0bn in August and have been strong all year thanks to a number of tailwinds (see below). Year-to-date flows of $29.2bn are also already above last year’s record total inflows.

Finally, European equity outflows persisted in August. PanEuropean equities shed ($2.7bn) and German equities shed ($1.1bn) as earnings continued to deteriorate and inflation remains stubbornly low.

Ursula Marchioni, Chief Strategist, iShares EMEA commented: “There was no August lull in the ETP landscape, with flow volumes still going strong at $39.8bn. July and August saw a total of $95bn of inflows into global ETPs, making Q3 the strongest quarter of the year so far, and that is without September’s data. ”

“Emerging markets, across both equity and fixed income, stole the show this month. A benign Dollar, stable oil and decent data in China, coupled with positive signs from the earnings side, explains why ETP equity flows into this sector show no sign of abating. For fixed income, the search for yield which is on-going globally is also a strong supportive point."

“Over the past six months, gold has been a standout for ETP flows. With over $1bn of inflows into gold in August, it is worth noting that this is half the amount that was recorded in July and a quarter of that witnessed in May and June. Despite the recent fall in the gold price, we still consider gold to be attractive from a diversification perspective.”

“Within the European ETP Landscape, flows in August meant equity ETP inflows for the year have returned to positive levels. This is a clear indicator of investors starting to become less risk averse, following recent post-Brexit market volatility . At the same time, investor demand for smart beta strategies continues with $3.4bn of inflows this month. Within European equities specifically, whilst broad European equity funds continue to witness large outflows, European factor funds have gathered net inflows. This divergence suggests that when investors start to reallocate back to European equities, they do so taking a precautious and selective view, rather than going into broad market exposures.”

Next Finance , September 2016

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