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March inflows of USD11.6bn help US ETPs reach Q1 record

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ETP assets in the US rose by USD7.9bn to USD1.19 trillion last month, accumulating an increase of 14.1% YTD after the first quarter of the year, according to figures released by Deutsche Bank.

Global ETP industry assets edged higher to USD1.63 trillion, or 13.3% up YTD.

Investors are still hungry for risk, but more selective US ETP flows experienced sturdy inflows of USD11.6bn during March, recording the strongest Q1 ever (+USD52.0bn, 5.0% of last year’s AUM). Within long-only ETPs, total flows were +USD11.2bn in March vs +USD11.6bn in Feb.

Equity, Fixed Income, and Commodity long-only ETPs experienced cash flows of +USD7.5bn, +USD4.2bn, and -USD0.4bn, respectively.

March was overall a favourable month for risk. However, we observed that the main theme played by market participants was to invest in the safest bets among risk-on trades, signalling a certain degree of concern on their part.

According to long-only ETP flows, investors’ equity preferences in March were: (1) region wise, US (+USD5.9bn) over other regions or countries. (2) Within the US, Large Caps (+USD6.6bn) over Small Caps (-USD2.1bn). (3) Among US Sectors, Domestic Cyclicals (+USD1.1bn) over Global Cyclicals (-USD0.6bn) and Defensives (+USD0.5bn). Within domestic cyclicals, Financials (+USD1.6bn) and Technology (+USD0.6bn). (4) Style wise, dividend funds (+USD1.6bn) were again the way to go. (5) And finally, outside the US, there was still some interest in broad EM (+USD1.3bn) and Japan (+USD0.6bn) products.

While preferences in the fixed income space were: (1) Credit over Rates, but this time with a tilt towards IG (+USD2.2bn) over HY (+USD1.0bn). (2) Corporates (+USD2.7bn) and Sub-Sovereign (+USD0.7bn) (e.g. EM Sov. Debt) over US Sovereign debt (-USD0.3bn).ETFs continued to grow faster than Mutual Funds. At the end of February, ETF inflows (USD37bn) contributed 3.9% to the YTD ETF AUM growth; while only 0.9% (USD76bn) of the YTD Mutual Fund AUM growth was attributable to new cash.

There were 13 new ETPs and one new ETN listed during the previous month. The new product offering was dominated by Fixed Income ETFs with focus mostly on the corporate sector; the following group was represented by Equity products with a tilt towards income-generating investments, and one Commodity ETV with focus in Agriculture.

Floor activity improved, but is still on low levels consistent with volatility. Total monthly turnover increased by 9.3% to USD1.31 trillion vs. USD1.19 trillion in the previous month. US ETP trading made up 27.3% of all US cash equity trading in March, down from both its recent peak of 37.5% last August and its 3-year monthly average of 30.3%. The largest increase was on Equity ETP turnover, which rose by USD102bn or 9.9% to USD1.13 trillion, followed by Fixed Income products turnover which grew by USD7.4bn, totalling USD76bn at the end of March. Meanwhile, Commodity ETP turnover rose by USD973m to USD86bn last month.

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