Flows into global ETPs in March rose above February’s inflows, with USD115.6 billion added over the course of the month according to BlackRock’s latest report.
Below the surface, trends differed vs. February: equity flows stayed relatively steady with USD74.8 billion in, slightly down on February’s USD76.1 billion, while fixed income flows rose to USD25.5 billion.
Commodity buying rose to the highest level since April 2020 with USD13.8 billion of inflows, including a record month for gold.
BlackRock writes that given Europe’s proximity to the conflict in Ukraine, European equity flows (-USD6.5 billion) turned negative in March for the first time since October 2020, with the largest outflows since August 2019. Selling was led by EMEA-listed European equity ETPs (USD5.5 billion), which registered their largest monthly net sell on record. In contrast, March outflows from US-listed European equity came in at -USD1.2 billion, following a year of consistent allocation to the exposure and with little signs of selling out.
The outflow trend has not spread across asset classes, with investors buying European fixed income in March: European-focused investment grade credit returned to positive territory (USD0.9 billion in, after -USD1.2 billion out last month), for example, helping turn flows positive. European rates buying slowed from USD1.3 billion in February to USD0.3 billion in March, but inflows of USD0.5 billion into inflation linked bond ETPs represent the highest monthly allocation on record. This comes at a time when energy-driven inflation is acutely affecting European prices, while TIPS flows have also turned positive for the first time in three months (USD3.0 billion).
March saw record inflows of USD11.3 billion into gold ETPs – a fivefold increase on February’s levels, trouncing the previous high of USD9.4 billion set in July 2020. This has come amid increased safe-haven moves in the market, but the propensity to buy gold has been building – BlackRock writes that the firm has seen a persistent flow trend emerge, with three consecutive inflow months for the first time since August-October 2020. Gold buying was spread across listing regions, in line with the trend YTD. So far in 2022, flows into gold ETPs total USD16.3 billion, more than reversing 2021’s net outflows of -USD9.8 billion.
Broad commodity ETPs also remained popular with investors. A further USD1.8 billion was added in March, continuing a six-month inflow trend, albeit down month-on-month from the USD4.0 billion added in February.
While investors allocated to energy (USD1.7 billion) in March, BlackRock writes that it has actually seen inflows across the sector spectrum – highlighting that investors are using this market volatility to build up allocations across the barbell. This was also reflected in factor ETPs – while value flows turned flat in March, investors continued to add to quality with a net buy of USD2.2 billion, the largest inflow month so far in 2022. Where were investors selling in March? The financials sector (-USD7.0 billion), which appears to have been indiscriminately punished in this round of market volatility. While March represented a record monthly outflow level from financials, this follows record monthly inflows recorded in January (USD11.0 billion).
Energy’s popularity with investors is not new news, the company writes. Investors have consistently allocated to the sector since the start of 2020, with just five months of outflows over the period. Cyclical allocations haven’t been isolated to energy, either: industrials saw their first inflow month since April 2021 with USD0.5 billion added in March, while materials recorded their second-highest monthly inflow level (USD2.5 billion), marginally behind the record set in 2013.
The tech sector (USD4.6 billion) led the way in terms of allocations in March, gathering its largest monthly inflows since November 2021. Healthcare inflows of USD2.6 billion have also reversed February’s outflows of -USD1.5 billion.
Sustainable looking for momentum
Flows into US and EMEA-listed sustainable ETPs dropped to their lowest level since August 2020 in March, with USD5.6 billion added. This was largely due to a decline in EMEA-listed ETPs flows to USD3.4 billion, while US listed ETPs saw inflows of USD2.2 billion.
In EMEA, buying of clean energy ETPs was a relative bright spot, with USD1 billion added – the highest monthly inflow level since January 2021. Screened strategies were second most popular (USD0.8 billion), with buying led by US exposures. ESG best-in-class (BiC) – which normally leads sustainable flows – came third, with equity BiC ETPs registering their first monthly outflows (-USD0.8 billion) since March 2019. In line with broader trends, European equity (-USD1.0 billion) and eurozone equity (-USD0.6 billion) ESG ETPs led outflows, while global exposures were marginally negative, down on their six-monthly average of USD0.9 billion. Investors continued to allocate to fixed income ESG ETPs (USD1.4 billion), with record flows into global exposures (USD0.7 billion), while European ETPs reversed February’s outflows to gather USD0.4 billion.
US ESG flows returned to positive with USD2.2 billion added, just topping their six-month average of USD2 billion. Equity flows made up the vast majority of inflows with USD2 billion added, led by ESG-optimised strategies (USD0.8 billion). In line with EMEA trends, investors also allocated to US clean energy ETPs.