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US ETP AUM recovers USD30bn on market reversal

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The total US ETP flows from all products registered USD11.5bn of inflows during last week vs USD1.7bn of inflows the previous week, setting the YTD weekly flows average at +USD2.1bn, according to the latest figures released by BlackRock

Last week long only ETPs received healthy inflows of USD10.8bn following an increase in investors’ risk appetite as the equity market rallied underpinned by news of aid for the distressed European financial markets. Long only equity ETPs received almost USD10.0bn in new cash, while fixed income and commodity ETPs followed distantly with +USD549m and +USD455m (Figure 1).

Despite the significant size of last week’s flows, we believe that we shouldn’t hasten to call this the end of the risk off trade and the comeback to risk. The main reason is that last week’s reading is not a pure one as it is probably affected by flows related to the S&P 500 index rebalancing and derivatives expiry activity. Actually, it is possible that as much as USD6.0bn of inflows (mostly into SPY) could be related to such activity and thus deemed as temporary. On the other hand, inflows into equity ETPs after adjusting by this abnormal activity would still be above USD3.0bn and therefore worth to keep under our risk radar.

Although the usual defensive trades were not reversed during last week, risk-related trades dominated the flows during such period. Among equity sector flows, Domestic (+USD762m) and Global (+USD180m) Cyclicals overtook Defensives (+USD30m); while in the fixed income world High Yield (+USD170m) slightly overtook Investment Grade (+USD152) funds.

There were 4 new ETFs and 3 new ETNs listed on NYSE Arca during the previous week. The new products cover a broad range of asset classes employing elaborated strategies and focusing in niche sectors.

Total weekly turnover increased by 27.8% to USD458bn vs USD358bn in the previous shorter week; while on a daily average basis it remained fairly constant (USD89.5bn vs. USD91.6bn, respectively). The largest increase was on Equity ETP turnover, which rose by USD99bn or 32.2% to USD409bn. Fixed Income ETP turnover increased by USD629m to USD14.9bn last week. Finally, Commodity ETPs products turnover decreased by USD1.7bn, totaling USD28.2bn at the end of last Friday.

Strong inflows and a significant market rally took ETP AUM to higher levels. US ETP AUM rose by USD29.8bn or 3.0% compared to the previous week and closed at USD1.037 trillion or 4.2% up YTD.

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