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ETP investors embraced equities in July


Global exchange-traded products attracted total inflows of USD22.6bn in July, according to data released by BlackRock.

ETP investors embraced equities, adding USD21.0bn, primarily in US exposures. 

Ultra-low interest rates and speculation about monetary easing by the European Central Bank encouraged risk appetite. US large cap products attracted USD6.9bn while more economically sensitive US small cap inflows reached a nine-month high of USD2.3bn.
Equity income strategies remained a major draw for ETP investors. High-dividend yield, real estate and preferred stock ETPs generated a combined USD3.1bn in July. Investor use of higher-yielding equity ETPs in their search for above average returns has supported year-to-date inflows of USD21bn into the category – 48 per cent above last year’s comparable seven-month total of USD14.2bn.
Emerging markets equity ETPs drew USD3.6bn, split evenly between broad exposure funds with USD1.7bn and country-focused exposures with USD1.8bn.
Investors seeking enhanced return potential turned to high yield bonds (USD2.0bn in net inflows), investment grade corporates (USD1.6bn inflows) and emerging markets bonds (USD1.2bn inflows). Alternatively, safe-haven government bond ETPs saw outflows of USD3.7bn globally. 
Bond ETPs are driving industry flows now more than ever, garnering a 35 per cent share in 2012’s first seven months. While all segments of the fixed income ETP market have grown, recent growth has been prominent in investment grade corporate, high yield and emerging markets, representing some of the market’s higher-yielding segments.
Fixed income ETP flows have displayed stamina through recent periods of both rising and falling US interest rates, bolstering the case for continued growth in this category through changing yield scenarios. For example, between year-end 2008 and 2009, a period during which 10-year Treasury yields increased 160 basis points. Fixed income ETPs attracted more than USD60bn, led by government and inflation ETPs with combined inflows of USD28.5bn. Investment grade corporate and high yield together contributed USD20.2bn during that period. 
Dodd Kittsley, global head of ETP research for BlackRock, says: “The continued robust growth in ETPs globally is a testament to the efficiencies that they can deliver including transparency, liquidity and precision in a diverse set of asset classes. The highest monthly flows into equity ETPs since January and flows in July into higher yielding fixed income ETPs suggest an overall increase in risk appetite among ETP investors.”

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