BlackRock reports that global ETP flows registered USD24.5 billion in June, more than double the level of flows seen in April (USD11.1 billion) and May 2016 (USD10.7 billion).
Global fixed income inflows were nearly three times as high as equities in H1 2016. The firm reports that in June, there were signs of risk sentiment returning with global flows into equities substantially overtaking fixed income. Fixed income ETPs however were the product of choice for the first half of 2016, with cumulative global flows for fixed income nearly three times as high as equities (USD66.7 billion and USD23.5 billion respectively).
BlackRock reports divergence in appetite for equity products among European and US investors. In the last week of June, there was a divergence in flows for US-domiciled and European-domiciled ETPs. There was USD8.3 billion of equity outflows from US domiciled ETPs. In contrast investors seeking to capitalise on the surprise marketing rally resulted in European listed equity ETPs amassing USD2.4 billion in flows.
The report says that low / minimum volatility equity ETP flows surpassed 2015 flows in first six months of 2016. The category registered USD2.8 billion in flows for June, contributing to the USD17.2 billion year-to-date flows. In 2015, low / minimum volatility strategies amassed USD11 billion for the full year.
And finally, gold dominated commodity inflows: in H1 2016 gold inflows led the charge, with USD22 billionbn invested into the precious metal. Investors placed over USD2.5 billion of assets into gold exposures in the week following Brexit (contributing to the USD5.4 billion for the month), as investors de-risked amidst heightened uncertainty around future of the EU.
Ursula Marchioni, Chief Strategist, iShares EMEA at BlackRock says: “June flows have been mixed, demonstrating an absence of consensus amongst investors. Flows looked to be very tactical with risk sentiment shifting on to off to back on from day to day, especially when it comes to broad European exposures.
“The performer of the year still continues to be gold, with gold based ETPs accumulating USD5.4 billion in June, and USD22 billion for the year so far. Investors are seeing this as increasingly opportune given its negative correlation to global equities, and an attractive source of diversification.
“A rally in risk assets prompted by investors shifting out of cash in search of higher returns supported flows into developed market equities, with broad global exposures gathering USD10.4 billion for the month. Investors seem to be positioning for imminent and coordinated central bank stimulus, a stance which has been implied by the central bank speeches since the Brexit vote and will be supportive of equities in the near-term.
“ETP flows reflected the evolution of investor sentiment before and after the EU Referendum result. European equities were down USD2.1 billion on the month up to 23 June 2016. Outflows then stabilised with inflows into broad European equity ETPs immediately following the vote, but still ending the month down USD1.8 billion. Similarly, within the fixed income space preference for longer dated treasuries at the start of the month turned into short dated treasuries as the result of referendum limited the chance of a US rate hike this year.
“Within European exposures, the UK is one of the only countries remaining in the green in terms of cumulative flows for the year (+USD1.3 billion). Investors did not seem to be immediately reacting to Britain’s vote to leave the EU, having seen just USD72 million leave UK equities post announcement. However, there was a clear rotation out of UK mid-caps (FTSE 250) and into UK large caps (FTSE 100). With just 21 per cent of revenues being derived from UK operations for FTSE 100 companies versus 58.6 per cent of revenues from the domestic market for FTSE 250 companies, investors are clearly trending towards large caps given the greater exposure to internationally focused revenues amongst domestic uncertainty.”
