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GLD overtakes SPY as the largest ETP due to risk off trade


Equity markets in the US (S&P 500) plunged by 4.69% by the end of last week, while Gold prices advanced 6.02%. Market movements and flows have crowned a new king among ETPs: GLD, according to Deutsche Bank’s latest US ETF Market review.

The total US ETP flows from all products were USD1.1bn of inflows last week vs USD7.5bn of outflows the previous week, setting the YTD weekly flows avgerage at +USD1.7bn.

Within long only US ETPs, Equity products added another round of outflows (-USD3.1bn) last week and completed 4 weeks of straight negative flows for a total of -USD18.7bn in such period. At the same time, we have seen increasing and consistent inflows to Fixed Income and Commodity ETPs. Last week Fixed Income funds received USD2.0bn of inflows, lead by IG funds with USD1.6bn; similarly Commodity ETPs also received USD2.0bn in inflows, driven almost exclusively by Gold products with USD1.9bn. On a quarter to date basis, Equity, Fixed Income, and Commodity products have recorded flows of -USD8.7bn, +USD4.5bn, and +USD6.2bn.

Recently, another face of the risk off trade has been most notable among long only US-focused Sector ETPs. Flows pattern among sectors grouped by business cycle sensitivity suggest that fears about a US recession have increased. In the risk off trades earlier this year we had seen outflows from Global Cyclicals, inflows to Defensives, and flat flows to Domestic Cyclicals, suggesting that most of the defensive trade was being fuelled by global growth concerns; however sector allocations took a clear shift during last week with Domestic Cyclicals experiencing massive outflows of USD2.9bn, while Global Cyclicals recorded USD1.6bn of outflows and Defensives received USD518m in inflows (Figure 2).

There were four new ETPs and one ETN launched in the NYSE Arca during the last week. The new products offer access to US Mortgage REITs, Target Date funds, Emerging Markets Small Cap stocks and Volatility exposure (See further details on Figure 3).
Total weekly turnover decreased by 40.8% to USD516bn vs USD872bn in the previous week. The largest decrease was on Equity ETP turnover which fell by USD308bn or 40.3% to USD456bn. Commodity ETPs turnover decreased by USD26bn to USD33.9bn last week, mainly driven by Precious Metals ETPs. Finally, Fixed Income products turnover decreased by 47.1% totaling USD21.9bn at the end of last Friday.

The economy may not be in recession yet, but ETP AUM growth already entered into negative territory for 2011. Assets dropped by USD20.5bn or 2.1% falling to USD982bn as of the end of last Friday. On a YTD basis ETPs have recorded negative growth of 1.3% or a USD13.4bn slip.

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