BlackRock writes that despite elevated market volatility off the back of coronavirus related shutdowns, global ETP flows remained positive in March (USD17.2 billion) albeit at the lowest level since August 2019.
Fixed income suffered its largest monthly outflow on record and the first since June 2015 with USD34.5 billion out across global ETPs, according to BlackRock. In contrast, commodities had their largest monthly inflow on record (USD11.7 billion). Inflows of USD35.3 billion into equity ETPs indicate little capitulation in equity flows thus far, and recouped the outflows that came at the end of February, the firm says. Sustainable flows also continued, with USD14.6 billion added, following on from the USD23.5 billion added in February.
BlackRock reports key themes this month, including credit enjoying a rollercoaster experience. The firm writes: “Indiscriminate selling of fixed income ETPs at certain points in March led flows lower across the month, as investors sought to use ETPs as liquid vehicles for accurate market pricing amid a lack of liquidity in the underlying market.
“Despite elevated market volatility, trends did start to emerge with money returning towards the end of the month.”
Credit ETPs have had a rollercoaster period, the firm says, with investors selling out of globally listed high yield (HY) and investment grade (IG) consistently from the last week of February through to mid March (-USD30 billion). This started to reverse into the end of March as central bank easing including corporate bond purchases in Europe and the US supported sentiment towards credit. From 22 March, investors added USD8.6 billion into euro and USD IG exposures) and USD2.5 billion into HY, bringing the monthly totals to -USD7.1 billion and -USD0.8 billion, respectively.
Rates ETPs had increased flows week on week, culminating in the second highest weekly inflow on record (USD9.2 billion) in the second week of March at the height of the flight to safety, BlackRock writes. The exposure was then sold in the second half of the month amid indiscriminate outflows, which resulted in a monthly inflow figure of USD9.4 billion (following on from USD10.5 billion added in February).
Staying home was another key theme for March. BlackRock writes that investors added to risk in March – albeit selectively, with a significant domestic bias within US and European equities. Among US equity ETPs, US-listed products gathered USD31.8 billion, while EMEA-listed products lost USD7.0 billion.
Within European equity, inflows into EMEA listed ETPs totalled USD3.1 billion, reversing two months of outflows, while US-listed counterparts registered USD3.9 billion of outflows, reversing two months of modest inflows.
BlackRock writes that US equity flows were focused in large cap exposures, although small caps also gained inflows (USD1.9 billion). In contrast, investors in European equities sold small caps (-USD0.6 billion).
Equity sector flows continued to go into technology, healthcare and energy, while financials remained unpopular. Utilities – a bond proxy sector – had outflows for the first time this year, predominantly from US equity products (-USD0.8 billion), with European utilities registering small inflows of USD11 million.
BlackRock writes that inflows of USD8.9 billion into Japanese equities were exclusively into APAC-domiciled funds, and included USD14.4 billion of purchases by the Bank of Japan, which were ramped up in March and implies that domestic investors sold the exposure. Similarly, within emerging markets, outflows of USD1.1 billion over the month masked an underlying home bias, with selling out of US and EMEA-listed funds contrasting with buying in LatAM and APAC-listed funds.
Finally, BlackRock observed a trend in metals and oil. The firm writes that despite gold coming under pressure from investors looking to cover liquidity concerns in other asset classes over the course of the month, gold ETPs gathered USD7.7 billion in March – their second highest monthly inflow on record. This includes a record USD5.2 billion added in the penultimate week of the month, driven by a return to buying in US-listed gold ETPs, which had lagged EMEA-listed flows up to that point.
Investors also added USD0.5 billion to silver ETPs. “March was also a record month for crude oil ETPs, which gathered USD6.1 billion, compounding the USD2.2 billion added in February. The ongoing supply dynamics between Saudi Arabia and Russia do not appear to have deterred investors, who have increased their buying in crude oil every month this year,” BlackRock writes.