BlackRock writes that global ETP flows inched higher in August, with USD49.4 billion added, up from USD46.9 billion in July.
Equities commanded a bigger slice of the inflows, with USD29.7B added – accounting for 60 per cent of net buying in August vs. 42 per cent in July, BlackRock says. Meanwhile, fixed income inflows moderated to USD23.2 billion.
Commodity outflows tempered from July’s record levels, with USD4.5 billion of selling in August, BlackRock says.
The pickup in equity buying was driven by US equity inflows more than doubling month-on-month, from USD12.6 billion in July to USD30.2 billion, which more than offset increased outflows from European equity, BlackRock writes.
EM flows remained relatively consistent at USD1.8 billion in August and were split quite evenly between broad market exposures and single country exposures (dominated by China and Brazil).
European equity ETPs continued to be sold in August, for the sixth consecutive month. The region saw USD7.7 billion of outflows – the second-highest on record, behind the USD8.9 billion of outflows post-Brexit vote in July 2016. Amid an uncertain central bank policy outlook, slowing activity and falling consumer confidence, outflows predominantly came from broad European large cap exposures. Both US and EMEA-listed ETPs registered outflows (EMEA-listed outflows accounted for USD4.2billion).
Bloomberg writes that, as has been the case across the year, credit ETPs were unable to record a second consecutive strong inflow month. High yield (HY) outflows totalling USD3.5 billion in August – almost entirely out of US HY – took the shine off the USD5.2 billion added globally to investment grade (IG) ETPs. This left August credit flows at USD1.7 billion, significantly lower than the USD14.0 billion added in July.
Investors have still been allocating to risk in fixed income. BlackRock writes that August marked the first inflow month for emerging market debt (EMD) since January, with USD1.4 billion added, almost entirely into hard currency exposures. YTD flows remain negative, however, given the USD11.7 billion lost between February and July.
Elsewhere in fixed income, rates flows fell to USD10.0 billion in August, down from USD17.3 billion in July. Short-duration exposures returned to positive territory after July’s outflows, with USD1.5 billion added, while intermediate term ETPs accounted for the biggest proportion of rates flows (USD5.3 billion). Long-duration exposures accounted for 32 per cent of rates flows, down from 47 per cent in July.
BlackRock writes that with Q2 earnings season all but over, August marked a shift in sector flow trends, with overall allocations down month-on-month. Sectors that have consistently recorded outflows over the past few months saw selling moderate in August. Meanwhile, overall buying of sectors such as healthcare and tech – which have gathered inflows in recent months – fell from July levels.
Financials notched up a first inflow month since January, with USD2.4 billion added, all towards the end of the month. As highlighted above, this came amid a broad reduction in sector ETP flows in August, meaning that financials constituted the largest sector allocation over the course of the month. US-listed US financials ETPs drove inflows into the sector, while European exposures continued to be sold, and EMEA-listed US financials exposures continued their outflow trend.
Defensive sector flows persisted over August, albeit at lower levels, with USD0.7 billion into healthcare and USD0.7 billion into tech, while utilities flows picked up for a fourth consecutive month (USD0.8 billion).
Sustainable ETPs recorded a total of USD4.1 billion of inflows in August, across EMEA- and US-listed products, BlackRock writes. This was less than half the USD9.0 billion added in July – the strongest inflow month so far this year – but significantly higher than the buying seen in May and June (USD876 million and USD2.8 billion, respectively). EMEA-listed products once again led the inflows, with USD3.2 billion of buying vs. USD948 million for US-listed ETPs.
In EMEA, flows into ESG best-in-class fixed income ETPs dominated sustainable buying, taking USD1.6 billion for the month – the second-highest monthly inflows this year – driven by euro corporate, euro aggregate, and emerging marker (EM) exposures, writes BlackRock. ESG optimised strategies were the next most popular, with USD762 million of inflows, dominated by US (USD414 million) and world (USD199 million) exposures. ESG best-in-class equity strategies – which recorded strong inflows in 2021 but have seen weaker sentiment this year – recorded USD570 million of inflows. This was just below the YTD monthly average of USD621 million and was a result of muted demand across the strategy, rather than being driven by significant outflows from a particular exposure.
BlackRock writes that US-listed sustainable ETPs recorded USD948 million of inflows – their fourth-highest total for 2022 and above their YTD monthly average of USD827 million. Equity flows accounted for the vast majority, with USD824 million of buying. Within equities, flows were equally divided across ESG optimised (USD283 million), environmental strategies (USD260 million) and ESG best-in-class (USD158 million) exposures.