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Europe and emerging markets star in best year so far for ETPs

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This year is proving to be the best year so far for global growth of ETPs, according to research by BlackRock. February saw global ETP flows of USD50bn, which represented the fourth best month on record and pushed the year-to-date figure to USD62.3bn.

The research showed that investors are increasingly choosing non-US equity and corporate bonds, with pan-European equity exposures hitting a new monthly high of USD8.9bn. The introduction of quantitative easing by the ECB, better than expected economic results and a weaker euro, supported the inflow. 

The four month extension to the Greek bailout also encouraged investors to stick with Europe. The STOXX Europe 600 index has risen 14.5 per cent year to date, or 5.9 per cent in USDterms. While the Euro did not depreciate as much as it did in January, US dollar hedged ETPs with pan-European and German equity exposures remained popular, bringing in a combined USD3.8bn while EAFE exposures contributed another USD2.5bn.

Other winners over February, according to the BlackRock research, included fixed income flows which strengthened to USD17.8bn led by a new monthly record of USD5.2bn for high yield corporate bonds as the search for yield intensified.

A five month run of outflows in emerging markets equity funds came to a halt with inflows into the sector over the month standing at USD2.7bn on the back of new accommodative monetary policies of many central banks. Emerging market funds also reflected the underlying benefits of lower oil prices. Inflows were concentrated in China equities with USD1.6bn, largely locally-listed funds, with broad EM adding USD0.7bn.

Fixed income funds gained momentum in February led by corporate bonds, bringing in a record USD9.6bn to beat the previous best of USD7.1bn from January 2012. High-yield corporate fixed income funds surged to a new monthly high of USD5.2bn and investment-grade corporate debt added USD4.5bn.

Rate sensitive ETPs saw their popularity hit by uncertainty over the pace of monetary tightening in the US. Treasuries saw inflows of USD3.3bn in February, with just over half going to short maturities as investors sought to mitigate interest rate risk.

A third straight month of inflows for Japanese equities saw the total hit USD2.9bn as stocks reached their highest level since May 2000, bolstered by better economic data. Asset gathering was split between US and Japan listed funds.

Commodity funds added inflows of USD3.5bn and have now brought in over USD10bn in the past three months. Crude oil funds gathered USD1.7bn as oil prices stabilised and gold accumulated an additional USD1.1bn despite low inflation expectations.

 

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