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iShares by BlackRock reports a September slowdown in ETP flows

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The September ETP report from iShares by BlackRock reveals that global flows into ETPs fell to USD35.9 billion in September, down from USD51.2 billion in August, driven by a halving of fixed income (FI) buying (USD12.0 billion in September vs. USD23.3 billion in August).

The firm writes that the drop in fixed income flows at the headline level masked huge dispersion below the surface. Rates buying more than doubled, while spread assets largely reversed August’s inflows.

Equity flows held up relatively well, falling from USD31.4 billion in August to USD31.0 billion in September, while commodities continued their outflows for a fifth consecutive month (-USD6.9 billion).

Rates buying propped up headline fixed income flows in September, more than doubling from USD10.1 billion to USD21.9 billion and reversing the downwards trend we’ve seen in rates flows since June. iShares writes that this went almost entirely into US Treasuries, while selling out of Italian BTP exposures offset inflows into European rates ETPs. Short-term exposures accounted for 88 per cent of all rates flows – a dramatic increase from 15 per cent in August, the firm says.

The flight to rates coincided with a rotation out of spread assets in September, with selling out of investment grade (IG, -USD2.7 billion), high yield (HY, -USD2.4 billion), and emerging market debt (EMD, -USD4.1 billion). Splitting by listing region, EMD (-USD2.3 billion) accounted for the majority of outflows from EMEA-listed FI ETPs, with selling concentrated in local currency exposures.

Inflation-linked bond ETPs notched up outflows for the fifth time in the past six months (-USD3.6 billion), taking YTD net flows to -USD7.9 billion. Nevertheless, investors remain positioned in inflation-linkers, with YTD outflows only a small fraction of the record USD47.9 billion added in 2021.

Although conviction towards equities fell on the whole, there were signs of selective allocation. Emerging market (EM) equity inflows reached their highest level since April (USD7.7 billion), entirely into APAC-listed ETPs. US equity flows remained positive, albeit down from August, with USD18.8 billion added in September.

Healthcare buying fell to its lowest level since February, with flows flat for the month despite USD0.2 billion being added to EMEA-listed healthcare ETPs. Utilities ETPs gained USD1.0 billion, while financials (-USD3.1 billion), industrials (-USD1.2 billion), materials (-USD1.1 billion), and tech (-USD2.0 billion) all saw outflows globally in September. The outflows from financials reversed the USD2.5 billion of buying in August at the global level, despite net inflows into EMEA-listed financials ETPs for the first time since January, with USD0.4 billion added to global and European exposures. Minimum volatility saw increased allocations (USD2.7 billion), but was the only factor to gather meaningful inflows in September.

The September ETF report from iShares at BlackRock reveals that September marked the fifth consecutive month of outflows from commodity ETPs (-USD6.9 billion), bringing the total net sell since May to -USD32.4 billion. Given the four months of inflows that preceded this outflow streak, YTD commodity flows are now at -USD2.1 billion overall. Gold ETPs once again accounted for the majority of selling in September (-USD5.1 billion), in line with the outflow trend seen in every month this year except July. This was followed by outflows from broad market exposures (-USD1.3 billion). US-listed exposures once again dominated commodity ETP outflows (-USD4.5 billion) but remain in positive flow territory YTD (USD1.7 billion) – in contrast to net outflows from their EMEA-listed peers YTD (-USD2.3 billion).

Flows into EMEA- and US-listed sustainable ETPs continued to slow in September, with USD3.6 billion added vs. USD4.1 billion in August. September inflows went almost entirely into EMEA-listed exposures (USD3.5 billion), and were led by ESG-optimised ETPs, with USD4.8 billion added. This was partly offset by factors + ESG exposures, which saw outflows totalling -USD3.5 billion. ESG best-in-class saw the next largest inflows (USD1.3 billion), followed by ESG screened ETPs, with USD796 million added in the first inflow month this year for the exposure. Allocation to climate exposures was relatively flat on the month (USD285 million).

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