BlackRock’s ETP Landscape report for January 2016 reports that global ETPs gathered USD13.9 billion as investors contemplated heightened market volatility markets and falling global growth forecasts.
The firm writes that turbulence in global equity markets led many investors to safe-haven assets such as developed government bonds, with US Treasury ETPs generating inflows of USD9.1 billion. “This was the third-highest monthly inflows into U.S. Treasury ETPs in the last five years and seems to challenge the highest-ever full-year inflow of USD14.4 billion accomplished in 2009.
The report also found that anticipated central bank stimulus in Japan and Europe prompted inflows to Japan and European equity funds of USD5.2 billion and USD2.4 billion, respectively.
“US equity ETP investors shed USD11.2 billio, reducing exposure to economically-sensitive and ‘high-beta’ sectors, such as mid / small caps (-USD3.4 billion) and cyclical sectors (-USD3.5 billion), in particular. Despite this, 2016 outflows year-to-date are less severe than in January 2015 when U.S. equity funds shed USD18.4 billion. Minimum volatility products generated USD1.3 billion, predominantly led by investor demand for US equity exposures,” BlackRock writes.
Turning to Europe, the firm finds that comments from the European Central Bank led to USD1.8 billion of flows into broad European equity ETPs. UK equity funds attracted USD821 million. Sovereign bonds were preferred by investors as a risk-off tactical adjustment. The category saw inflows of USD1.4 billio. However, these were partially offset by outflows in the credit space (-USD663 million).
Over the month, commodity funds gathered USD4.3 billion, the strongest month since February 2015. Flows were fuelled by demand for crude oil and gold products, each recording inflows of USD2.8 billion and USD1.9 billion respectively.
Ursula Marchioni, Chief Strategist, iShares EMEA at BlackRock says: “January 2016 flows were even higher than the 2015 figure as investors used ETPs to express investment views in turbulent markets. A catalogue of uncertainties during the month, ranging from falling crude oil prices and a lower world economic growth outlook, saw global investors shed some risk from their portfolios and turn to safe haven assets. There was a notable swing away from US equities, with over USD11 billion flowing out of the asset class, compared to over USD26 billion of inflows in December 2015 alone.
“Interestingly, global flows into commodity products suggested some contrarian investors believe energy prices could have sold off too far, with commodity products recording their strongest month of inflows since February 2015. Gold and energy based exposures led the charge of flows into this sector.
“Despite significant volatility in the equity markets, not all ‘risk-on’ assets recorded outflows. This trend was particularly pertinent in Europe, where equities were the flavour of the month in the region. European-listed products recorded USD3 billion of inflows. This demand was driven by hints from the European Central Bank to loosen monetary policy, which led to increased optimism among investors about the region’s economic outlook.”