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BlackRock’s March report reveals trifecta of records

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BlackRock’s Global ETP report for March reveals a trifecta of records: record monthly flows, record quarterly flows and record year-to-date pace.

Annualised industry growth accelerated in March to 22 per cent versus 13 per cent for full-year 2016. Quarterly flows in the first quarter were at USD189.1 billion, surpassing the previous quarterly flow record of USD137.8 billion from 2014 Q4.

The year-to-date 2017 flows are more than two and a half times larger than year-to-date 2016 flows, the firm reports.

Global ETPs gathered USD64.8 billion, marking record year-to-date pace and new quarterly and monthly flow records, while there were USD30.9 billion of inflows into European ETPs year-to-date, more than double the USD13.3 billion average flow figure seen by this stage since 2010.

The firm reports that US equities led flows globally, the weaker dollar lifted EM flows and fixed income flows remained resilient. Patrick Mattar, from the iShares EMEA capital markets team at BlackRock, comments on the five key stories behind the European ETP flows in March 2017:

“For the sixth month in a row, flows into European-domiciled equities funds (+USD7.1 billion) surpassed fixed income (+USD2.7 billion). This is the fifth largest ever month of inflows into equities. To put this into context, the previous six months is the largest ever six month period of accumulation for equity ETFs domiciled in Europe.

“EM debt inflows totalled USD1.3 billion in March, achieving the highest level of inflows of any category in fixed income. Both local and hard currency funds have generated significant inflows this year, against the backdrop of President Trump’s protectionist rhetoric. The attractive and relatively high quality yield have been key drivers of flows.

“As geopolitical risks reduce and equity fundamentals improve, investors continue to move into European equities at pace. Both European-and US-domiciled funds have gathered assets every week since early February 2017. December 2015 and January 2017 combined, USD39 billion was withdrawn from US domiciled European equity funds, a reduction in the total asset base of 45 per cent.
  
“Following the US election EM equity and fixed income ETFs saw large outflows driven by President Trump’s protectionist policies. This year that situation has reversed, with flows intensifying over March. The positivity towards EM is about more than just fixed income. Despite remaining USD80 milion behind their pre-election AuM, European-domiciled EM equity ETPs have rebounded. This suggest that investors have focused more on the pull back in US dollar and the reduction in US Treasury yields, rather than the recent rate hike.

“Following the US election, investors were selling their holdings in gold ETPs. This year, views have seemingly diverged by domicile. European investors have consistently added to Gold ETPs, with only two weeks this year in which there have been outflows and close to USD1 billion of inflows over March. Flows into gold funds domiciled out of Europe have been much less consistent, with some large outflows at the start of the month. This dynamic suggests European investors are currently more focused on portfolio diversification than those elsewhere.”

BlackRock also notes that flows into robotics ETFs and mutual funds have accelerated significantly over the last 12 months, from an estimated USD5.09 billion to USD8.95 billion over this period, according to Bank of America Merrill Lynch.

The firm writes that the four robotics ETFs globally (two US and two European) grew from USD415 million at 31/12/2016 to USD1.08 billion at 31/03/2017.
The firm finds that investors are part of a wider phenomenon of interest in the robotics sector with searches for ‘Automation & Robotics’ more than doubling over the last five years, showing an increase in global awareness.

The global supply of industrial robots has been increasing steadily over the last 10 years, increasing from 60,000 to 254,000 since 2009. BlackRock writes that the robotics theme is about much more than use in industry. Robot usage is growing in everyday life, with the worldwide number of domestic household robots set to increase to 31 million between 2016 and 2019 (Source: IFR World Robotics Report 2016).

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