November ETP figures from iShares by BlackRock reveal that global flows into ETPs fell to USD86.5 billion in November, down from USD114.2 billion in October, with propensity for risk dropping off towards the end of the month as Omicron-related concerns hit the tape.
The fall in flows came as a result of reduced buying across equity (USD72.0 billion) and fixed income ETPs (USD14.0 billion), with flows into the latter reaching their lowest level since March 2020, when -USD28.0 billion was lost, BlackRock writes.
However, commodity ETP flows hit positive territory for only the second time in six months, with USD1.3 billion added amid the broader market volatility.
BlackRock writes that emerging market (EM) equities were a relative bright spot in November, with flows picking up to USD8.1 billion amid a drop off in buying of other equity exposures. US equity ETP flows fell to USD45.9 billion vs. USD58.3 billion in October, driving the headline fall in equity inflows. Meanwhile, Japanese equities registered their first outflow month since May 2019 – despite positive flows into EMEA-listed Japanese equity ETPs persisting (USD0.9 billion in November).
Flows into EM equity ETPs this year have already reached record levels, the firm says, as inflows have hit USD70.5 billion YTD, surpassing 2018’s record (USD62.2 billion) and dwarfing the flat flows in 2020.
“While broad exposures led EM equity buying during the first half of the year, in the second half of the year we have seen this reverse, with regional and single market ETPs – particularly China and Brazil – accounting for the majority of flows. In fact, since the start of July, regional and single country EM equity ETPs have totalled USD24.2 billion, compared to USD7.9B into broad EM ETPs, highlighting a more selective approach by investors.
Flows into inflation-linked bond ETPs continued in November, with USD5.1 billion added – the second-highest inflows on record after October’s USD6.5 billion. BlackRock reports that investors also added to rates ETPs with a further USD6.2 billion of inflows in November, predominantly into US rates, continuing an inflow streak that stretches back to March.
Flows into investment grade (IG) and high yield (HY) bond ETPs diverged for a second consecutive month, with IG ETPs registering inflows (USD2.0B) and HY seeing outflows (USD0.5B), largely moving in opposite directions to October, BlackRock says.
EMD flows rebounded to USD0.6 billion in November, after marginal outflows in October. Looking below the relatively lacklustre headline figures, investors have been allocating to Chinese bonds consistently across the year – accounting for the majority of inflows over the past three months – but this has been offset by selling out of broad EMD exposures.
BlackRock reports that buying in gold ETPs returned to positive territory for the first time since July, with USD0.7 billion of inflows in November, spread across listing regions. The inflows came consistently across the whole month, not just at the end of the month when market volatility picked up.
The firm writes that sector ETP flow trends reflected the change in market sentiment in the last week of the month, with outflows from financials, materials and industrials, and increased flows into tech ETPs (USD2.9 billion – the joint highest week of inflows for the sector on record).
Overall, financials flows dropped to the lowest level since outflows in September 2020, with just USD0.1 billion of inflows in November – a significant drop from USD4.6 billion added in October. Energy also registered a second month of outflows in four, with USD1.6 billion out. Tech flows persisted at USD4.8 billion across the month, healthcare flows increased to USD1.6 billion, and materials flows turned positive for the first time since June, with USD0.9 billion of inflows.
BlackRock writes that sustainable ETP flows continued their momentum, with combined net inflows into US and EMEA-listed ETPs rising from USD10.0 billion in October to USD12.2 billion in November – the fourth-highest inflow month of 2021. EMEA-listed products led, with USD8.6 billion of inflows vs. USD3.3 billion for US-listed counterparts.
EMEA-listed sustainable flows continued to be driven by equity best-in-class strategies (USD4.3 billion), BlackRock writes, which in turn were led by US (USD1.5 billion) and global exposures (USD0.9 billion). ESG tilt strategies had their strongest month since January, with flows rising from USD0.7B in October to USD1.0B in November.
Flows into climate strategies came in at USD0.8 billion, with the majority going into Eurozone Paris Aligned Benchmark (PAB) strategies. This was, however, slightly down on the USD1.0 billion added in October, which was a record for 2021. Within fixed income, flows into green bonds picked up markedly, with USD0.1 billion added in November for their second-best month of the year.
BlackRock writes that US flows came in on the monthly average for 2021, with USD3.3 billion. Equity flows dominated, with ESG Optimised strategies seeing a marked increase from USD0.7 billion in October to USD1.1 billion in November. At the other end, environment-based strategies returned to their six-month flows average, dropping back to USD0.2 billion for November vs USD0.6 billion in October.