BlackRock’s ETP Landscape report for April 2017 shows that global ETP flows of USD40.1 billion in April brought assets close to USD4 trillion.
BlackRock notes that the industry has doubled in size in just over four years, thanks to record inflows of USD228.6 billion year-to-date and USD524.5 billion over the past 12 months.
Non-US equity flows exhibited the greatest momentum, reaching USD15.2 billion for the month driven by favourable outlooks for broad Europe and broad EM exposures. Investor demand for fixed income funds persisted, with flows of USD11.6 billion, the fourth straight month over USD10 billion) due to EM debt, investment grade corporate and US Treasuries.
Patrick Mattar, from the iShares EMEA capital markets team at BlackRock, comments on the five key stories behind European ETP flows in April 2017:
“For the seventh month in a row, flows into European-domiciled equity ETFs (+USD1.29 billion) surpassed fixed income (+USD1.27 billion). The margin was, however, much closer than in recent months. Over the previous 12 months there have been USD40.2 billion of flows into equity ETPs while bond ETPs took USD21.6 billion.”
Europe has dominated, he says. “Flows into European equities continued, seemingly spurred on by the French election first round result and consensus-beating earnings numbers. USD3.6 billion added to European equity ETPs in April, behind the USD4.9 billion added in March. April was the first month since October 2015 that flows into US-domiciled European equity funds outpaced flows into European-domiciled equivalents – from December 2015 to January 2017, USD39 billion was withdrawn from US-domiciled European equity funds.”
Mattar writes: “April was the third month in a row of flows into EM equity ETFs. This follows a three-month period of outflows following the US election where President Trump’s protectionist rhetoric appeared to spook many ETF investors. Over the last two years, the MSCI Emerging Markets Index has been in negative territory (down -2.5 per cent), with the flow pattern following the market return relatively closely.”
“Emerging market debt inflows totalled USD1.1 billion in April, making it the largest flow category within fixed income – a position it has maintained every month so far this year. Both local and hard currency funds have generated significant inflows this year, contrary to market expectations given President Trump’s protectionist rhetoric. At yields of 5.4 per cent and 6.2 per cent respectively, the attractive yield premium over developed market exposures and the less volatile yield compared with high yield credit have kept flows coming back following a Q4 2016 sell off election-driven outflow period. At the same time, USD1.1 billion has flowed out of Euro investment grade year-to-date, exiting core European exposures with outflows increasing following the first round of the French election.”
Mattar writes that European investors were net sellers of US equities, preferring instead European equity ETFs. “US equity exposures have taken USD170 billion in the six months since the US election, the largest flow category in the global ETF space over this period. The USD1.6 billion outflow from European-domiciled US equity funds in April was the largest outflow category of all within the European-domiciled space, and the largest monthly outflow from US equities since March 2015.”
