February ETF flow figures from iShares at BlackRock reveal that inflows into global ETPs were moderate for a fifth consecutive month in February, with USD22.5 billion added with reduced buying across equities and fixed income.
The firm writes that equity flows moderated from USD33.3 billion in January to USD8.5 billion in February, while fixed income (FI) buying also moderated from USD28.6 billion in January to USD12.8 billion in February.
Commodity flows held relatively steady at USD0.8 billion, for a second consecutive month of inflows.
Outflows from US equity ETPs (-USD5.5 billion) continued across listing regions for a second consecutive month – the first time this has happened since February-March 2018, BlackRock writes. While US investors again looked beyond domestic exposures, US-listed equity allocations didn’t flow into emerging markets (EM, USD0.6 billion), in contrast to January trends. US-listed inflows into European equities continued, however, in line with global flow trends.
European exposures were the largest equity allocation in February, with USD6.3 billion of inflows, following the USD7.3 billion added in January. Investors have been late to this trade: Q4 saw three months of outflows from European equities (-USD1.9 billion), contributing to last year’s record -USD17 billion of outflows.
US-listed ETPs accounted for 56 per cent of European equity flows in February and 72 per cent in January, putting them on track for the best quarter since Q2 2021 –although US-listed money doesn’t tend to be sticky.
Credit flow momentum unwound in February, with -USD1.6 billion out of global investment grade (IG) ETPs and -USD6.7 billions out of high yield (HY). Rates flows drove the buying in FI, increasing MoM to USD10.9 billion, dominated by US Treasury exposures –a trend that didn’t carry over to EMEA-listed rates ETPs. The shift out of FI risk also came through in outflows from EM debt ETPs (-USD1.5 billion).
The shift out of credit was less prevalent among EMEA-listed FI ETPs, with USD1.0 billion added to EMEA-listed IG. This included USD0.7 billion into euro IG, led by short-duration exposures –in contrast to January, when full duration gathered the majority of flows. HY also notched up USD0.2 billion of inflows, for a fifth consecutive inflow month, BlackRock writes.
The financials’ sector notched up its first significant inflow month since October, with USD1.4 billion added in February, up from flat flows in January, Blackrock says this came alongside inflows into industrials (USD0.5 billion) and technology (USD0.8 billion); in contrast, energy (-USD1.8 billion) suffered its largest outflow month since July.
The healthcare sector is now on a three-month outflow streak, with a further net sell of -USD1.4 billion in February. Given net inflows of USD50.2 billion into global healthcare ETPs from 2020-2022, YTD outflows of -USD3.3 billion are a long way from fully unwinding positioning, the firm says. The majority of outflows this year have come out of US healthcare ETPs.
The shift out of defensively-tilted equity exposures is also highlighted by continued outflows from minimum volatility factor ETPs: a further -USD3.7 billion flowed out in February, following January’s net sell of -USD3.9 billion. Investors have been consistently adding to value ETPs for five months, and this continued into February with USD1.1 billion of inflows, BlackRock writes.
Sustainable ETP flows in February remained in line with January levels, with USD5.7 billion added across US-and EMEA-listed exposures. In Europe, inflows slowed at a headline level, with USD4.1 billion added vs. USD5.7 billion previously –mostly due to lower flows in the fixed income space, across all strategies. US-listed exposures, in contrast, saw flows rise to USD1.5 billion in February vs. -USD800 million in January.
Within Europe, equities accounted for the majority of sustainable ETP flows (USD3 billion), mainly driven by ESG best-in-class (USD1.5 billion) and ESG screened strategies (USD1.2 billion). On a regional basis, EM exposures (USD1.6 billion) saw the strongest inflows, driven by ESG best-in-class strategies, followed by European exposures (USD900 million), led by screened strategies. Fixed income flows in Europe totalled USD1.1 billion, a slowdown from the previous month’s elevated levels, but in line with February 2022. The majority of fixed income flows went into ESG best-in-class strategies (USD800 million), led by eurozone exposures, the firm says.
In the US, February flows returned to positive territory after two months of outflows. Inflows were split equally between equities (USD758 million) and fixed income exposures (USD783 million). Inflows into both asset classes were driven by ESG tilt and ESG best-in-class strategies. Most of the flows went into US exposures (USD1.2 billion).