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Global ETP buying rebounds in October according to BlackRock data

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iShares by BlackRock writes that global ETP buying rebounded in October to the highest level since June, with USD113.0 billion of inflows, up from USD86.7 billion in September.

The firm writes that the increase was driven primarily by a pickup in equity buying, which reached USD85.8 billion in October, up from USD62.6 billion in September. Inflows into US equity ETPs more than doubled from USD28.3 billion to USD59.8 billion.

Fixed income flows fell to USD21.5 billion, despite a record month of inflows for inflation-linked bond ETPs. Interest in commodity ETPs remained lacklustre, with USD0.5 billion of outflows in October, the firm says.

While US equity buying rose across US and EMEA-listed ETPs, with US-listed flows at the highest level since June, EMEA- listed buying was at the highest level since March.

The firm writes that Japanese equity flows remained consistent in the run up to the election: USD3.3 billion was added globally in October vs. USD3.4 billion in September, continuing an inflow streak that has almost erased the USD17.5 billion of outflows from January 2018-May 2020. Buying in EMEA-listed Japanese equity ETPs drove 31 per cent of the global inflows in October – up from 18 per cent in September – while US- listed flows turned negative (-USD0.8 billion), reversing the USD0.9 billion of inflows in the previous month.

Flows into EMEA-listed Japanese equity ETPs have reached USD6.3 billion so far this year – on track to set a new annual record – while flows into US-listed ETPs are set to end the year in positive territory for the first time since 2013, with USD0.5 billion added so far, the firm writes.

October was a record month for inflation-linked bond ETP flows amid rising inflation concerns, with USD6.5 billion added, says BlackRock. This was nearly double September’s USD3.5 billion and takes global flows to USD39.9 billion YTD – more than double the USD17.3 billion added in 2020. October’s flows were primarily driven by buying in US-listed ETPs (USD5.9 billion), although inflows into EMEA-listed products also rose 5.5x month-on-month to USD0.5 billion.

The majority of inflation-linked flows went into products focused on the US, continuing the trend seen over the past couple of years. Buying in eurozone inflation linkers also increased to USD0.4 billion – the third- highest on record, and up from USD0.1 billion in September.

Elsewhere in fixed income, high yield (HY) and investment grade (IG) flows moved in opposite directions for the first time since July, with USD0.7 billion out of IG and USD1.8 billion into HY. Buying in rates also rose to the highest level since June, with USD5.6 billion of inflows, primarily into US Treasury exposures, BlackRock says.

Global flows into minimum volatility (min vol) ETPs turned positive in October for the first time since February 2020, with USD0.5 billion added. Simultaneously, quality ETP flows returned to positive territory (USD0.8 billion) after outflows in September (-USD0.6 billion), while value flows were marginally negative in the exposure’s third outflow month of the year.

Delving deeper, flows into min vol ETPs were driven by buying of US-listed US-focused exposures, while EMEA-listed products notched up USD0.2 billion of outflows – cancelling out the USD0.2 billion of inflows across the previous two months.

At a sector level, flows once again pointed to a barbell approach, with tech (USD5.5 billion) and financials (USD4.6 billion) leading the way. Investors continued to sell more manufacturing-tilted cyclical sectors, such as industrials (-USD1.2 billion) and materials (-USD0.3 billion), in a continuation of trends that have persisted across the second half of the year, BlackRock writes.

Sustainable flows picked up momentum in October, with USD10.0 billion of net inflows across US and EMEA-listed ETPs – surpassing the previous two months and coming in as the sixth largest month of 2021. EMEA- listed ETPs gathered USD7.0 billion – more than double the amount added to US-listed counterparts (USD3 billion).

EMEA flows were led by best-in-class equity strategies (USD3.6 billion), which in turn were driven by strong inflows into global (USD1.7 billion) and US exposures (USD0.7 billion), BlackRock writes. 

ESG themes saw USD1.3 billion of inflows, while ESG optimised/tilt strategies gathered USD1.1 billion. Within ESG themes, flows into clean energy ETPs bounced back from -USD38 million in September to USD0.2 billion in October. Flows into climate- exclusive strategies rose sharply from USD0.3 billion in September to USD1.0 billion in October, largely driven by buying of Climate Transition Benchmark (CTB)/Low Carbon Transition strategies.

Breaking down US-listed sustainable flows, ESG optimised exposures gathered the most assets in October (USD0.7 billion), albeit less than the previous month (USD1.0 billion). Environment-based strategies saw a significant increase, bringing in USD0.6 billion; while this represents a significant uptick from the average over the previous six months (USD0.2 billion), the rise was solely due to a USD0.5 billion inflow into an individual solar strategy. Screened strategies also saw an increase in flows, with USD0.6 billion added in October, up from USD0.4 billion in September, BlackRock writes.

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