BlackRock’s latest ETF report shows that global ETP flows registered USD39.8 billion in August. The firm comments that another it was a very strong month with the summer holidays clearly not deterring investors.
The firm sees continued evidence of a risk-on environment, with USD26.7 billion of the flow total going into equities, with US as well as broad EM equities gathering the majority of the flows. Fixed Income gathered USD11.6 billion of inflows, concentrated around three key exposures: broad market; US investment grade corporates and emerging market debt.
BlackRock writes that commodities have witnessed a drastic slowdown in flows compared with the volumes seen throughout the rest of 2016, however, gold saw USD1.0 billion of inflows this month.
In Europe, equity inflows have picked up and are now finally in the positive in terms of flows for the year. Similarly to the global landscape, US equities and broad emerging market equities gathered the majority of inflows, up USD1.6 billion and USD1.4 billion respectively.
Broad European equities were still down a further USD1.3 billion on the month, despite evidence of buying across European smart beta towards the end of the month as investors become more selective within their exposures to the region.
For the second month running, half of the inflows went into emerging market debt, with the remainder going into investment grade corporates, with a particular preference for European corporates over US corporates in this region. Gold was the only exposure within the commodity space to see any notable inflows this month, gathering another USD1 billion of assets.
Ursula Marchioni, Chief Strategist, iShares EMEA says: “There was no August lull in the ETP landscape, with flow volumes still going strong at USD39.8 billion. July and August saw a total of USD95 billion of inflows into global ETPs, making Q3 the strongest quarter of the year so far, and that is without September’s data. ”
“Emerging markets, across both equity and fixed income, stole the show this month. A benign Dollar, stable oil and decent data in China, coupled with positive signs from the earnings side, explains why ETP equity flows into this sector show no sign of abating. For fixed income, the search for yield which is on-going globally is also a strong supportive point."
“Over the past six months, gold has been a standout for ETP flows. With over USD1 billion of inflows into gold in August, it is worth noting that this is half the amount that was recorded in July and a quarter of that witnessed in May and June. Despite the recent fall in the gold price, we still consider gold to be attractive from a diversification perspective.”
“Within the European ETP Landscape, flows in August meant equity ETP inflows for the year have returned to positive levels. This is a clear indicator of investors starting to become less risk averse, following recent post-Brexit market volatility. At the same time, investor demand for smart beta strategies continues with USD3.4 billion of inflows this month. Within European equities specifically, whilst broad European equity funds continue to witness large outflows, European factor funds have gathered net inflows. This divergence suggests that when investors start to reallocate back to European equities, they do so taking a precautious and selective view, rather than going into broad market exposures.”