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Tradeweb data shows reversal of ETF trading patterns

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ETF trading platform Tradeweb reports in its latest ETF Radar report that its data reveals a reversal of ETF trading patterns between November 2016 and January 2017.

The firm writes that institutional investors are increasingly relying on exchange-traded funds to gain access to a broad range of asset classes and investment objectives. In times of heightened market volatility, as in the weeks surrounding the recent US presidential election, ETFs can offer investors diversification of economic, currency and risk exposure.

Notional volume executed on the Tradeweb European-listed ETF marketplace significantly increased following Donald Trump’s surprise victory in November 2016. During the month, activity in equity-based ETFs amounted to 58 per cent of the overall platform flow, with ‘buys’ narrowly beating ‘sells’.
North America Equities was by far the most heavily-traded sector with nearly EUR2.5 billion in notional, of which 59 per cent was ‘buys’. Emerging Markets Equities came second with traded volume amounting to just below EUR1.8 billion. The sector saw net selling with a ‘buy’ ratio of just 31 per cent amid concerns over the impact of future US policies on trade and immigration.
 
Overall, ‘sells’ in fixed income products outstripped ‘buys’ in November, as a proportion of the total traded volume. Emerging Markets, Corporate and High Yield bond ETFs were mostly offered with ‘buy’ ratios of 15 per cent, 35 per cent and 37 per cent respectively. Government Bonds was the most popular fixed income category with more than EUR1.6 billion in traded notional.
 
However, Tradeweb writes that analysis of platform activity in the first month of the new year reveals a reversal in investing patterns, as the markets began to digest the new political landscape. “The post-US election shift into North American equity ETFs slowed down to a ‘buy’ ratio of 53 per cent, after a high of 62 per cent in December 2016. Europe Equities saw strong ‘buying’ of 65 per cent in January – up from 44 per cent in November – and was the most popular ETF category during the month with more than EUR3.2 billion in notional. 
 
Emerging markets debt ETFs experienced the most pronounced change in January 2017, with a ‘buy’ ratio of 74 per cent, Tradeweb writes.
Similarly, corporate and high yield bond ETFs were heavily bid, with ‘buy’ ratios of 60 per cent and 78 per cent respectively. Aggregate Bonds, which invest in both government and corporate debt securities, saw their volume increase to approximately EUR630 million, up EUR248 million compared to November.
Meanwhile, commodity-based ETFs also saw net buying in January, with ‘buys’ accounting for 69 per cent of the volume executed in the asset class, which, Tradeweb says, doesn’t tend to move in lockstep with stocks and bonds over the longer term.

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