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Risk-off trade affects ETP flows

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Total US ETP flows from all products last week registered USD3.6bn of outflows vs USD4.7bn of inflows the previous week, setting the YTD weekly flows average at +USD2.2bn, according to Deutsche Bank’s Weekly US ETF Market Review.

Market and ETP Flows trends suggest that market participants have engaged in a risk-off trade following April’s rally. DB believes that investors are concerned with the continuity of the recovery path once QE2 ends in June. While the data doesn’t suggest that investors are betting on a double dip, it does propose that investor are unwinding some of their risky positions (e.g. Equities, Commodities) in favour of higher quality/safer positions (e.g. IG bonds, Gold, cash). In other words, we could say that investors have shifted from a bullish view on the equity markets to a more neutral one as they wait for further news or data surprises which could shed more light about the economy beyond the ending of QE2.

Long-only equity ETPs recorded USD5.0bn of outflows last week vs USD4.5bn of inflows the previous week. From a geographic allocation perspective, most of the outflows came from US-focused ETPs (-USD4.0bn), while DM ex US, EM, and Global ETPs recorded flows of -USD228m, -USD953m, and +USD149m, respectively.

Long-only Fixed Income ETPs recorded inflows of USD1.3bn last week. Corporates had USD471m inflows, followed by broad benchmarked funds with USD287m. Commodity ETPs recorded outflows of USD178m, both agriculture and broad benchmarked products experienced the largest outflows of USD54m. Silver and Gold ETPs experienced the largest flows at a sub sector level with USD460m of outflows and USD434m of inflows, respectively.

There were 10 new ETPs listed during the previous week. These new ETFs offer additional exposure to the global auto industry, inflation protection, HK small caps, and a whole new range of growth/value oriented disciplines (Figure 22).

Total weekly turnover decreased by 3.8% to USD339bn vs. USD353bn in the previous week. Commodity ETPs recorded the largest absolute decrease of USD13bn settling at USD34bn in weekly turnover, much closer to pre-Silver-bubble levels. Equity ETPs accounted for 86% of all ETP weekly turnover with USD292bn. Finally, Fixed Income products turnover totalled USD10.8bn at the end of last Friday increasing by 13% from the previous week.

Outflows from ETPs and another negative week for the market shaved USD7.0bn from ETP AUM pushing assets 0.6% lower to USD1.078 trillion at the end of last week. On a YTD basis, ETP AUM is 8.3% or USD83bn higher.

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