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Defensive rotation drives improved ETP flows over August says BlackRock

The latest global flows into ETPs figures from iShares by BlackRock reveals that they reached USD90.8 billion in August, a marked pickup from July (USD77.3 billion). 

The firm writes that equity flows increased to USD66.2 billion from USD53.3 billion in July, despite choppy market sentiment. Fixed income flows remained steady at USD23.6 billion, while commodity ETPs registered their third consecutive month of outflows (-USD1.9 billion). 
Beneath the surface, the defensive rotation continued, with inflows tilted towards tech and healthcare ETPs at the expense of cyclicals. This also came through in fixed income, with rates and investment grade (IG) credit leading the inflows. 

Commodity selling continued for a third consecutive month in August, with USD1.9 billion of outflows – the largest since March (-USD6.3 billion). The outflows were driven by USD1.3 billion of selling out of gold ETPs, but came from across the board (in contrast to June and July, when small inflows into gold and broad commodity ETPs helped to offset outflows from other exposures), the firm says.

Commodity flows continued to diverge on a regional basis, in a repeat of July’s trends: US-listed ETPs recorded USD2.1 billion of selling, while EMEA-listed ETPs gained USD0.4 billion of inflows. 

In contrast to outflows at the global level, strong buying of gold ETPs meant the exposure accounted for almost all EMEA-listed commodity ETP inflows, with USD0.6 billion added in August (on top of the USD1.0 billion added in July). So far this year, net flows into commodity ETPs remain in negative territory, with USD3.3 billion of outflows overall – predominantly from gold and crude oil ETPs, BlackRock writes.

Sustainable ETP flows were muted in August, with net inflows into US and EMEA-listed products falling to USD8.3 billion from USD12.2 billion in July. As a result, August was the second-lowest inflow month this year for sustainable ETPs, only surpassing the USD5.8 billion added in May. The bulk of sustainable flows in August went into EMEA-listed products, which recorded USD5.3 billion of net inflows. 

Buying was dominated by ‘ESG Best-in-Class’ ETPs, with USD3.3 billion of inflows spread across global equities (USD1 billion), US equities (USD0.8 billion), and European fixed income exposures (USD0.6 billion). 

Climate strategies contributed USD0.5 billion of EMEA-listed inflows in August – their third-highest inflow month this year, and the highest since March’s record USD0.8 billion. 

Breaking down flows into US-listed sustainable ETPs in August (USD2.9 billion), reduced buying of ESG optimised strategies was a key driver behind the fall, BlackRock says. ESG optimised ETPs had dominated flows in previous months, but recorded just USD0.9 billion of inflows in August vs. USD2.1 billion in July. US-listed climate strategies recorded USD0.5 billion of buying, and flows into screened strategies hit USD0.4 billion – close to their all-time monthly record set in February this year (USD0.5 billion).

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