The BlackRock ETP Landscape report for August 2017 finds that global ETPs have climbed to a new annual record.
The firm writes that global ETPs gathered USD47.4 billion, driving year-to-date flows to a new annual record, fuelled by strength in developed markets (DM) equity exposures and bolstered by fixed income.
US equities drew in USD9.5 billion, concentrated in large caps, amid strong corporate earnings and economic growth. Broad DM equities and Japanese equities collected USD7.6 billion and USD8.0 billion, respectively, against a backdrop of positive economic data.
Fixed income brought in another USD12.2 billion led by investment grade corporates, which captured USD4.2 billion, propelling year-to-date flows to USD39.6 billion.
Patrick Mattar, from the iShares EMEA capital markets team at BlackRock, lists five key stories behind the European ETP flows in August 2017.
1. Ooh la la
“August was another positive month for European equities. Despite being down on July’s figure, the USD1.1 billion that went into EMEA-listed ETFs mean there have now been 12 consecutive months of European equity ETP inflows – the longest inflow run on record.”
2. The trend is your friend
“There was a USD300 million net inflow into EMEA-listed momentum factor ETFs in August, the largest month for flows into momentum exposures ever. The majority went to world equity momentum ETFs. The momentum factor provides exposure to stocks in a given universe that have performed well in the recent past. The pick-up in flows to this area suggests that some investors are currently living by that old mantra ‘the trend is your friend’.”
3. Banking on financials
“August was the sixth inflow month in a row for European financials sector ETPs. It also means that the last six months are the largest ever in terms of inflows for these funds, many investors may be focussing on depressed valuations after a long period of underperformance. Concurrently, open interest in Eurex-listed Eurozone banks futures contracts is close to all-time highs (EUR7.6 billion). European banks indices have had strong upward moves recently which suggests many futures positions have been dominated by bullish investors. With the exaggerated skew toward ‘long’ futures contracts increasing roll costs on these contracts, investors with a positive view on European financials may start to look to ETFs for a more efficient exposure.”
4. Fixed income fragmentation
“Euro investment grade (IG) and emerging market debt (EMD) ETPs have been the dominant inflow groups within fixed income in Europe this year. Combined, these products have attracted USD11.2 billion of the total USD22.1 billion added to EMEA-listed fixed income ETPs in 2017. August was different: Euro IG and EMD ETPs contributed only 37 per cent of the total EMEA fixed income flows, having contributed 67 per cent of the flows over the three preceding months. The absolute flow values are also seemingly on a slight decline for both categories.”
5. Gold rush
“We have previously highlighted that US and EMEA investors appear to have had opposing views on gold this year. In August, this pattern changed as there were inflows into both US-listed gold ETPs (USD1.1 billion) and European-listed funds (USD0.3 billion). In a month characterised by rising tensions between the US and North Korea it appears that US investors have started to shelter in gold.”