BlackRock reports that on the back of a late flurry, flows into global ETPs inched higher in July, with USD44.2 billion added, almost half of this coming in the last week of the month.
The firm notes that fixed income dominated, in contrast to June. Fixed income accounted for the bulk of inflows (USD32.5 billion), mostly due to a pickup in credit ETP buying.
Cooling on commodities: July was the largest outflow month on record for commodity ETPs, with USD11.2 billion of selling.
A drop in equity flows to USD17.0 billion can be largely attributed to a slowdown in US equity buying to USD12.4 billion, down from USD25.9 billion in June. EM equity flows were flat in July after inflows in June, and European equity outflows stayed steady (-USD3.9 billion).
Sector selectivity continued to point to a defensive tilt in equity allocations. Healthcare – despite leading sector flows for three consecutive months (including USD2.6 billion in July) – is still only the second-most popular sector this year, behind tech (USD1.2 billion in July). The USD18.1 billion added to tech and the USD14.6 billion added to healthcare YTD are in stark contrast to energy, for example, which is now just USD0.4 billion up on the year after peaking at just over USD9 billion in March.
In July, despite a relatively solid earnings season for manufacturing-tilted sectors, energy (-USD2.7 billion), industrials (-USD0.7 billion), and materials (-USD1.4 billion) all registered outflows for a third consecutive month. Financials sector ETPs, which have been sold since March, also lost USD3.2 billion, although this was the lowest outflow month for the sector since March.
Fixed income flows recovered to USD32.5 billion in July, after June’s blip (USD3.2 billion), largely due to a pickup in credit buying (USD13.8 billion). Investment grade (IG) and high yield (HY) recorded USD9.9 billion and USD3.9 billion of inflows, respectively, recouping the 9.9 billion lost from credit in June and continuing a trend of inconsistent flows this year.
While the majority of IG flows went into US IG (USD7.7 billion), it was the highest inflow month for European-focused IG since April 2020, with USD2.2 billion added. In HY, US-focused ETPs took a larger proportion of flows, with USD3.7 billion of the total USD3.9 billion.
Rates flows were relatively constant MoM (USD17.3 billion) and inflation-linked flows turned negative (-USD1.9 billion). Rates ETPs have been by far the most popular fixed income exposure YTD, with USD103.4 billion of inflows, well ahead of IG in second place (USD19.2 billion).
The USD11.2 billion of outflows from commodity ETPs in July was not only the largest monthly outflow on record, it also marked a third consecutive month of selling for the first time since Feb-April 2021. The figure also surpasses the combined USD9.7 billion of outflows across May and June 2022.
Alongside an increase in gold outflows (-USD1.7 billion in June to -USD4.3 billion in July), selling of broad commodity ETPs picked up significantly, from -USD0.7 billion in June to -USD4.2 billion in July. This also marked the largest outflow month on record for broad commodity focused ETPs.
Outflows from commodity ETPs were broad-based and split fairly evenly between listing regions, with USD6.0 billion out of US-listed products and USD5.5 billion out of EMEA-listed ETPs.
Sustainable ETP flows soared in July, with USD9.6 billion added in total, compared to USD2.3 billion in June. EMEA-listed ETPs captured almost all of the buying (USD9.2 billion), with US-listed sustainable flows coming in at just USD0.3 billion. For EMEA-listed ETPs, July accounted for one third of inflows year-to-date, mostly thanks to a series of big trades in the last 10 days of the month that resulted in almost USD6 billion of inflows.
Taking a closer look at the EMEA-listed flows, buying was diversified between exposures and between equity and fixed income. Overall, best-in-class products collected most of the flows (USD4.9 billion), followed by ESG optimised exposures (USD2.3 billion), and factor ESG strategies (USD0.4 billion).
Equity flows, which accounted for USD5.6 billion, were led by ESG optimised products (USD2.3 billion), followed by ESG best in class (USD1.7 billion), and factor ESG (USD0.4 billion). In terms of geographic exposures, the majority of the flows were across US-focused products.
Fixed income flows accounted for USD3.4 billion, with USD3.1 billion of this going into best in class strategies, mostly in European exposures.