iShares by BlackRock’s review of ETP flows in January reveals that inflows into global ETPs in January were down on December’s bumper USD150.6 billion, with USD70.9 billion added, but the proportion of equity buying was at the highest level since March 2020.
Equity flows of USD66.2 billion accounted for 93.5 per cent of total ETP flows, up from 83 per cent in December, the firm says. Fixed income flows, in contrast, finished January in marginally negative territory (-USD1.5 billion), while commodity flows showed signs of life amid market volatility with USD5.1 billion added
Key themes in January are a risk on approach. iShares writes: “At the regional level, equity trends were similar to what we observed in January 2021: US equity flows accounted for USD7.4 billion (down from USD87.0 billion in December and vs. USD3.3 billion in January 2021), while flows into EM equity – predominantly China exposures – and European equity picked up, accounting for a larger share of overall equity flows.
“EM equity notched up a recordUSD16.8 billion of inflows in January, beating the previous record of USD16.0 billion set in December 2019. In line with the previous month’s trends, single EM exposures accounted for the vast majority of total flows (USD12.6 billion), with USD11.7 billion going to Chinese equity alone. Inflows into China were broad based, with record monthly levels for EMEA-listed (USD1.0 billion) and US-listed (USD3.1 billion) Chinese equity ETPs.
“European equity flows also picked up (USD8.0 billion), making January the largest inflow month since May 2021. In contrast to the 2021 trend of international buying outpacing domestic flows, EMEA-listed ETPs (USD6.1 billion) led inflows in January.”
Turning to fixed income, BlackRock reports that January marked the first outflow month for fixed income ETPs (-USD1.5 billion) since the initial Covid selloff (-USD27.5 billion in March 2020). These outflows were driven by the largest monthly selloff on record for high yield (HY) (-USD7.6 billion), led by US-focused, US-listed HY. Staying in credit, investment grade flows were fairly flat (-USD0.2 billion).
Inflation-linked bond ETP flows turned negative for the first time since April 2020, with -USD1.7 billion out amid a broad market repricing of central bank policy paths. While investors sold across listing regions, US-focused inflation-linked ETPs dominated selling, as eurozone linkers notched up small inflows (USD0.2 billion), the firm writes.
With all eyes on where investors are not buying in fixed income, EMD inflows have flown under the radar for several months. January flows of USD1.2 billion continued the buying trend, with China bonds particularly in demand (USD1.4 billion), despite -USD1.8 billion of outflows from hard currency.
BlackRock notes that all eyes have been on the value rotation in markets, but in flows, it has been more of a tilt. The firm writes that while inflow into value-tilted cyclicals have undoubtedly picked up – financials led the way in January with a record USD10.9 billion added – investors haven’t sold out of their quality exposures.
“Tech flows came in at a mutedUSD0.4 billion for the month, while healthcare flows were at USD3.2 billion – making it the third-most popular sector in January. Highlighting the investing we’ve seen across the barbell, utilities and energy flows picked up to USD1.3 billion and USD3.1 billion, respectively. In commodities, gold buying also rose to the highest level since May 2021, withUSD2.8 billion of inflows.
“After gathering inflows in the first two weeks of the month, buying in industrials reversed to end the month in negative territory (-USD0.2 billion), the ninth consecutive month of outflows. Meanwhile, materials flows turned positive, withUSD0.7 billion of inflows in January.
BlackRock writes that sustainable flows did not quite match wider ETP industry flows in January, with a significant slowdown in momentum from December. WithUSD7.3 billion inflows across the US and EMEA, flows for January totalled just over half of theUSD13.4 billion added in December 2021.
EMEA-listed flows saw the more significant drop of the two, falling fromUSD12.7 billion in December 2021 to USD6.7 billion in January 2022, while US-listed flows dropped from a lower base of USD0.8 billion to USD0.5 billion from December to January.
The majority of EMEA-listed flows went into best-in-class strategies, which saw inflows of USD4.9 billion. ESG-optimised strategies came in second with USD1.1 billion, followed closely by climate-exclusive strategies, which recorded their best month to date, with USD1.0 billion added. With -USD0.2 billion out, screened strategies saw their first net outflow month since March 2020.
Breaking down US-listed flows, best-in-class strategies and environmental strategies also registered January outflows, with net sells of -USD0.8 billion and -USD0.6 billion, respectively. Optimised strategies, however, saw inflows of USD1.28 billion and were the main driver of net inflows, alongside screened strategies, which gathered USD0.6 billion for the month.