Allocations to global ETPs fell for the fourth consecutive month in January, to USD62.6 billion, largely due to reduced equity buying at the start of the month, BlackRock writes.
Equity flows fell from USD43.1 billion in December to USD32.8B in January, while fixed income flows ticked up to USD28.7 billion (from USD28.3 billion in December).
Commodities turned positive, with commodity ETPs (USD0.9 billion) notching up the first inflow month since April 2022.
Europe on the agenda
US equity ETPs (-USD1.7 billion) saw outflows across listing regions in January –the first monthly net sell since April 2022. While some US outflows can be attributed to tax-loss harvesting, US-listed US equity actually finished the month flat, with outflows led by their EMEA-listed peers (-USD1.1billion).
Flows into European equity ETPs, in contrast, were significantly up on the month. European equity (USD7.3 billion) saw the largest inflow month since January 2022, led by US-listed European equity exposures –highlighting investors’ shift beyond the domestic market. The USD2.1 billion added to EMEA-listed European equity included sector allocations to financials and consumer staples, strongly led by broad market ETPs.
Sector flows point to selective risk-taking in US equity, with increased flows into materials (USD0.9B) –the largest monthly level since March 2022 – and industrials (USD0.8B). 2022 winners had a tougher month, with outflows from healthcare (-USD1.0 billion) and tech (-USD0.1 billion).
A bIG month for credit
BlackRock writes that investment grade (IG) credit (USD12.6 billion) registered the third-largest inflow month on record in January –the largest monthly net buy since June 2020. This positive sentiment carried over to high yield (HY, USD2.4 billion), which reversed December’s outflows of -USD0.9 billion.
“The re-risking trend is clear in EMEA-listed ETP flows. Allocations to EMEA-listed HY and IG accounted for 37 per cent of global flows –and an even larger share of EMD (53 per cent) –but c.1 per cent of US Treasury flows. In contrast to 2022 trends, EMEA-listed ETP flows tilted towards full-duration credit: –just 3 per cent of EMEA-listed IG flows went into short-duration, in contrast to c.17 per cent of global IG ETP flows. Overall, UCITS investors showed a strong preference for EUR vs. USD exposures.”
Flows into EM equity reached the highest level in a year in January, BlackRock writes, with USD15.9 billion added. In line with the trend seen in European equity, US-listed allocations (USD9.0 billion) once again led the way, supported by EMEA-listed inflows (USD5.3 billion). Global flows into EM equity were split between broad (USD8.6 billion) and single country exposures (USD7.3 billion).
China (USD6.4 billion) was the stand-out among EM single exposures, following inflows of USD8.9 billion in December, says BlackRock. January saw USD1.8 billion added to EMEA-listed China ETPs, matching the previous monthly record set in June 2022. US-listed allocations (USD2.1 billion) rose 3.5x on the month, the highest monthly level since June 2022.
EMD also notched up a second consecutive month of inflows, with USD2.2 billion added in January, following USD2.9B in December. This also follows the first outflow year on record for EMD, with USD9.0 billion lost in 2022. The inflows also come in tandem with re-risking across fixed income.
A sustainable start to the year
Sustainable ETP flows in January remained in line with December 2022 levels, with USD4.8 billion added across the US and Europe, BlackRock writes. EMEA-listed ETPs (USD5.7 billion) saw flows rise from USD4.3 billion previously, while the US (-USD855 million) recorded even stronger net outflows than December’s -USD100 million.
Within Europe, equity ETPs dominated sustainable flows, with USD3.6 billion added –the highest level since July 2022 – led by ESG best-in-class strategies (USD1.5 billion). At a regional level, EM equity (USD537 million) led the way, followed by global exposures (USD400 million). EMEA-listed fixed income flows (USD2.1 billion) were consistent with December levels (USD2.4 billion). ESG best-in-class strategies led buying with USD1.6 billion added, predominantly into eurozone (USD563 million) and US exposures (USD392 million).
In the US, sustainable flows were driven by fixed income (USD124 million), reversing December’s net outflows of -USD109 million. Buying was led by ESG Optimised strategies in US exposures (USD313 million). Equity saw net inflows into sustainability-related (USD33 million) and climate-exclusive (USD13 million) strategies.