BlackRock ETP Landscape report for February 2016 says that global ETPs gathered USD9.4 billion during the month.
The firm writes that investors expressed a preference for safe-haven assets, with US treasuries and gold-based ETPs commanding the lion’s share of assets, generating USD5.7 billion and USD7.2 billion respectively. “Having low correlation to the world equity and bond returns, gold tends to serve as a return diversifier when investors want to de-risk portfolios,” says BlackRock.
Meanwhile, weaker corporate earnings and macro picture reduced investor appetite for US and European equity risk. US equity ETPs shed (USD8.8 billion) and European equity ETPs recorded (USD4.2 billion) in outflows. Minimum volatility fund flows climbed to a record USD3.9 billion for the month and over USD5.3 billion for the year, focused in US equity-linked products as investors sought to mitigate higher volatility in the US market.
BlackRock recorded USD2.6 billion of new flows for Europe-domiciled ETPs. Strengthening inflows in government bonds, with US treasuries and European sovereign bonds recording USD600 million and USD900 million respectively, offset developed equity outflows of (USD1.7 billion). In line with global investor sentiment, gold was the favourite theme for European ETP investors, recording USD2.4 billion of new flows during the month.
The firm writes that despite Japanese equities’ underperformance, local ETP investors continued to buy domestic equity exposures. The category saw monthly inflows of USD2.3 billion from local investors. Inflows however were offset at a global level, with US investors selling (USD2.1 billion).
Ursula Marchioni, Chief Strategist, iShares EMEA at BlackRock says: “Recessionary fears kept investors on edge in February, leading them to flock to risk-off exposures and sell developed equities. The month saw records for gold-based and minimum volatility products, and US equites ETPs recorded a second consecutive month in outflows, shedding USD19.5 billion year-to-date. So far this year investors have shown a preference for safer haven assets with US treasuries and gold already ahead of their 2015 flows, generating a combined USD24 billion in the first two months.
“We did however see some episodes of higher risk sentiment in the second half of February. This bolstered flows into broad fixed income and investment grade corporate bonds, recording USD1.4 billion and USD2.5 billion respectively. Crude oil funds also brought in USD1.2 billion fuelled by ongoing talks around potential production cuts by OPEC and non-OPEC countries.
“Weaker macro data, lacklustre earnings in the final quarter of 2015 and ongoing concerns around Brexit, meant risk-off sentiment also gripped European ETP investors in February. Of the USD2.6 billion of new flows recorded in European-domiciled ETPs, we saw a turn in the tide among investors. Having been the most popular asset class in January, equities recorded net outflows for the month. Instead European investors became aligned with global markets and were more risk averse. This led to gold being the flavour of the month among European investors, recording USD2.4 billion in assets, followed by government bond funds.”