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BlackRock reports fastest ETP growth since 2009


The BlackRock ETP Landscape report for 2017 finds that global ETP flows of USD633 billion represented 18 per cent organic growth – the fastest growth since 2009 – and exceeded 2016’s flow record of USD378.4 billion by 67 per cent, fuelled by flows across equity and fixed income.

The firm writes that US equities brought in a new annual record of USD196.1 billion with tax reform prospects and economic growth driving flows to small-caps and a rotation into cyclical sectors.

Broad developed market equity funds collected a new high of USD116.2 billion spurred by favourable valuations and strong economic data, BlackRock writes.

Broad emerging market equities gathered USD54.4 billion in 2017, beating the previous record set in 2010 of USD31.5 billion, bolstered by stronger commodity prices and a weaker US dollar.

Fixed income funds captured USD156.2 billion, a new record and an increase of more than a third versus last year and marking new highs for investment grade corporate bonds, emerging market debt and US Treasury funds.

Patrick Mattar, from the iShares EMEA capital markets team at BlackRock, lists the following five key stories behind the 2017 European ETP flows.

1.      Spectacular rebound for Europe: We saw a spectacular revival for European equities in 2017, as both European and US investors piled back in, adding USD40 billion over the year. A trend seen throughout the year was that as the dollar weakened versus the euro, US investors looked to Europe. Flows have broadly been flat during periods of dollar weakness, and have grown when the dollar has strengthened.

2.      Golden opportunities: The enduring theme of the year within gold ETPs was the divergence in flow patterns between US-listed and EMEA-listed funds. US-listed gold ETP flows appeared relatively closely linked to the gold price in 2017, with investors reacting tactically to price moves in either direction. In Europe, on the other hand, investors invested fairly consistently throughout the year. September saw the only month of outflows this year from EMEA-listed ETPs suggesting that gold ETPs have been playing a more strategic role in European portfolios than in the US.
3.      EM assets in vogue: 2017 was a stellar year for emerging market funds across the global ETP landscape, with inflows reaching USD67.9 billion, just USD0.2 billion behind the record EM inflow of USD68.1 billion in 2012. Domestic demand and local political situations appear relatively benign. The EM growth picture therefore seems largely healthy, posing few threats to these positive flows continuing into 2018.

4.      Developed and diversified: A theme that endured throughout 2017 was investors in US-listed ETPs allocating to broad developed equities. In 2017, these US-listed funds added a staggering USD100 billion, a larger inflow than the whole of the European ETP industry across all asset classes over the same period.

5.   Investing for good: 2017 was nothing short of a breakthrough year for sustainable ETFs. There has been a total USD5.2 billion added globally, the previous best calendar year inflow was USD2.4 billion. The old assumption that accessing sustainable investments in an indexed wrapper meant lower returns is being disproved by modern passive fund construction. Changing end investor attitudes and regulatory guidelines in European countries regarding ESG considerations may be contributing to EMEA-listed funds attracting more interest than US-listed ranges.

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