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ETFs enjoy record inflows with fixed income and ESG taking the lead


The battle of the Titans in the ETF industry just took another turn with news that, in the US, Vanguard saw inflows of USD90.4 billion over the first half of the year, beating its ETF rival BlackRock which gathered ETF inflows of USD60.4 billion. 

The battle of the Titans in the ETF industry just took another turn with news that, in the US, Vanguard saw inflows of USD90.4 billion over the first half of the year, beating its ETF rival BlackRock which gathered ETF inflows of USD60.4 billion. 

This came despite The Federal Reserve’s decision to use fixed income ETFs for the first time as part of its programme to support US bond markets, a step widely seen as a public approval of ETFs in general, and one that was carried out through BlackRock.

Inflows have surged following the Fed’s announcement in late March to reach a first half global total of close to USD106 billion, while BlackRock reported specifically on the scale of inflows into investment grade corporate bond ETFs, which hit a record USD21.6 billion in June.

According to ETF data providers ETFGI, ETFs and ETPs listed in the US gained net inflows of USD57.59 billion during June, bringing year-to-date net inflows to USD189.04 billion, which is higher than the USD116.08 billion net inflows gathered at this point last year. 

Assets invested in the US ETFs/ETPs industry have increased by 2.6 per cent, from USD4.23 trillion at the end of May, to USD4.34 trillion, according to ETFGI, the third highest on record.

BlackRock’s iShares also reported that global figures for ETP inflows reached its highest point in June, with USD71.5 billion flowing into ETPs globally.

The firm writes: “This was driven primarily by record-breaking monthly inflows for fixed income, as investors added a whopping USD46.7 billion. Elsewhere, equity flows rose from fairly flat in May to USD23 billion in June, while commodity flows remained positive but dropped to their lowest level of the year with USD4.7 billion of inflows.”

BlackRock iShares comments that June’s record buying in fixed income is attributable to the highest inflow month for investment grade ETPs since records began, with inflows of USD21.6 billion beating the record set in April by USD8.3 billion, taking total investment grade inflows in Q2 to USD47.1 billion.

The firm writes that, delving deeper, inflows overwhelmingly went towards US focused IG, with buying in eurozone focused ETPs dropping off after a pick up in April and May.

Morningstar has reported on European ETF inflows over the second quarter of 2020, reporting that the sector saw inflows of EUR33.4 billion after EUR 4.4 billion of outflows in the first quarter.

As a result, assets rebounded to EUR903 billion from EUR780 billion in the first quarter, with investors strongly favouring fixed income, which attracted 70 per cent of the quarterly flows.

Environmental, social, and governance ETFs gathered EUR 6.7 billion, with equity ESG investments doing much better overall than mainstream peers, Morningstar reports and in Europe, iShares topped the ETF providers league table with EUR19.4 billion of inflows thanks, Morningstar says, to its dominance of the fixed-income ETF segment in Europe.

At these levels of inflows, Europe’s ETFs are again on course to hit the EUR1 trillion mark, Morningstar says.

“Investors found solace on the multitude of policy measures implemented by central banks to cushion the economy against the ravages of the coronavirus crisis, but most of the money was directed to fixed income. Bond ETFs attracted EUR23.3 billion of inflows, or 70 per cent of the quarterly total. Assets in bond ETFs grew by 14 per cent to EUR249 billion from EUR218 billion.

“Flows into equity ETFs totalled EUR 4.0 billion even though assets grew by 17 per cent to EUR544 billion from EUR467 billion, reflecting the strong bounce in equity markets during the quarter. Interestingly, equity ESG ETFs gathered EUR5.4 billion, thus implying that non-ESG equity ETFs saw mild outflows of EUR1.4 billion. This fits in with a narrative of investors seeking security, primarily in fixed income, but also in ESG-themed equity investments, which held up better than mainstream peers during the March rout.”

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