The May 2020 BlackRock iShares report finds that global ETP inflows fell at the headline level to USD45.8 billion in May, down from almost USD69billion in April. Despite the overall drop in flows, which, BlackRock says can be attributed to global equity flows ending the month flat, buying in fixed income ETPs increased to USD35.2 billion the second highest monthly inflow into the asset class on record.
Commodity ETP buying dropped to USD10.7 billion, down from April’s record month of over USD21 billion of inflows.
Key themes in May included the fact that the buying and selling trends in equity netted each other out, creating a fairly flat month, BlackRock says, with inflows into equity ETPs at minus USD79 million.
“Continued outflows from emerging market (EM) and European equity ETPs (-USD9.5 billion and -USD2.6 billion respectively) were offset by inflows into US (USD3.8 billion) and Japanese equities (USD9 billion), the latter of which was mostly into APAC listed funds and driven by purchases by the Bank of Japan, which accounted for around half of the total.”
BlackRock notes that EM equities have not recorded a month of inflows since January. Outflows have been indiscriminate, with investors selling out of broad EM and single country exposures, the firm says.
“Investors have continued to be selective in their equity exposure with flows into sector ETPs remaining elevated. Technology took the mantle from healthcare as the most popular sector in May, with USD5.2 billion of inflows, up from USD4.1 billion in April, while healthcare inflows dropped from a record USD7.3 billion in April to USD4.3 billion in May.
“Utilities and consumer staples, meanwhile, had outflows totalling USD1.0 billion. Selectivity through factors also continued with quality being the sole factor that gained inflows in May, with USD1.1 billion added. Value flows were flat despite a pickup in the last week of the month, which coincided with a revival in sentiment towards the factor.”
BlackRock writes that investment grade (IG) and high yield (HY) lead the way in flows into fixed income, with inflows into credit continuing to lead buying, albeit down from the record levels in April. Inflows into IG dropped slightly to USD12.3 billion, while HY registered USD7.7 billion of inflows.
“Although the vast majority of HY inflows were again focused in US-listed products, buying in EMEA-listed HY increased to USD1.5 billion, building on the USD1.1 billion of inflows in April, which came after a torrid couple of months that saw outflows totalling USD5.2 billion across February and March.”
BlackRock writes that flows have shown evidence of differentiation in investor sentiment in credit, depending on the listing region.
“Investors in EMEA-listed ETPs, for example, have been investing in eurozone and US IG in almost equal measures for two consecutive months now. Investors in US-listed ETPs, on the other hand, have displayed more of a domestic bias with the vast majority of money going into US credit, with small inflows into global exposures as well.”
The pickup in fixed income flows at the headline level can be attributed to increased buying in multi-sector ETPs – which tend to track broad fixed income indices, which gathered USD7.4 billion in May, up from USD2.7 billion in April, BlackRock comments.
“This offset falling inflows into rates ETPs, with USD2.7 billion added in May – the lowest monthly inflow since November 2019. Emerging market debt (EMD) registered USD0.6 billion of inflows over the course of the month, although beneath the surface, there was a clear preference for hard currency (+USD1.1 billion) over local currency.”
Finally, commenting on commodities, BlackRock writes that oil flows drop but silver shines, with inflows into commodities falling from April’s record levels (USD21.4 billion) to USD10.7 billion in May, due to a significant drop in interest in crude oil ETPs, which registered just USD0.9 billion of inflows, compared to a record USD11.4 billion in April, as oil price volatility dampened and investors moved away from tactical buying.
BlackRock notes that inflows into precious metal ETPs, on the other hand, drove overall net buying in commodities. Gold flows dropped a little to USD7.7 billion, with most of the buying focused in US listed ETPs, although inflows into EMEA products increased to USD2.2 billion.
Silver inflows totalled USD1.2 billion in May – a 3x increase from the previous month, and the largest monthly inflow on record. Inflows were largely into US-listed ETPs, and demonstrate how sentiment towards silver often lags gold, BlackRock comments.