November marked the highest inflow month for ETPs globally in 2023 so far, with USD127.5 billion added – almost double the prior month (USD66 billion) and the highest since December 2021’s record USD155.7 billion, BlackRock writes.
Equity flows rose to USD87.5 billion, the highest since December 2021, while fixed income (FI) flows rose to the highest level since October 2022, with USD38.8 billion added.
Commodity flows remained negative with USD1.5 billion out.
November saw a shift in FI allocations, with buying of credit ETPs surging – high yield had its largest inflow month on record (USD11.6 billion) and investment grade took its highest inflows since January (USD10.0 billion). Flows into rates, meanwhile, fell to the lowest level (USD4.3 billion) since January 2022.
November marked the largest inflow month on record for high yield (HY) ETPs, with USD11.6 billion added globally, BlackRock writes. This eclipsed the previous record set in April 2020 (USD8.6 billion) and more than reversed the cumulative USD8.7 billion of outflows from August to October that preceded November’s mammoth inflows.
At the same time, BlackRock writes that investment grade (IG) flows rebounded to the highest level since January (USD10.0 billion), reversing the USD7.9 billion of outflows that came in September and October. Highlighting the risk-on trend across fixed income, rates flows fell to their lowest level since January 2022, with USD4.3 billion of buying (down from USD30.4 billion in October).
The HY inflows in November took the year-to-date total back into positive territory (USD4.0 billion) for only the third time this year. Conviction on HY has been lacklustre across 2023, BlackRock writes, with five inflow months and six outflow months so far – highlighting the flip-flopping that has characterised the exposure this year. In contrast, IG flows are at USD34.5 billion YTD, with the up-in-quality trade playing out across the year: IG has had only two outflow months in 2023 (September and October).
IG inflows in November were fairly evenly split across intermediate and long-term exposures, with blended maturity ETPs leading and a fourth month of outflows from short duration ETPs. In contrast, HY flows went almost entirely (94 per cent) into blended maturity products.
In equities, the pickup in overall flows was driven by a threefold increase in US equity buying month-onmonth to USD74.7 billion – the highest monthly inflows since December 2021. Emerging market (EM) equity flows returned to positive territory (USD4.0 billion), while Japanese equity ETPs saw their first outflow month since April and the largest on record, with USD5.1 billion out – almost entirely from APAC-listed ETPs.
Of the USD74.7 billion of US equity ETP inflows, 87 per cent went into US-listed products, masking the pickup in EMEA-listed US equity ETP flows to USD8.1 billion – the highest monthly level on record. In line with the global trend, the vast majority of EMEA-listed flows went into broad market exposures, but also included USD0.5 billion into US tech ETPs – see more below.
EM equity flows also rose, with India notching up a ninth consecutive month of inflows (USD0.8 billion). In contrast to October’s flows, however, the majority of buying came from international investors, with USD0.4 billion into EMEA-listed Indian equity ETPs – a monthly record – and USD0.3 billion into US-listed exposures.
Tech’s leadership of sector flows returned in November, with USD9.2 billion added, USD7.2 billion of which went into US tech exposures. BlackRock writes: “This takes tech ETP flows to USD45.4 billion globally this year, making it by far the biggest sector allocation in 2023 and again following the up-in quality approach we have seen play out across asset classes. This also came through in factor flows, with quality factor ETPs gathering a further USD3.3 billion of inflows, while value flows were flat in November and at their lowest level since May.
“Elsewhere, financials recorded a first inflow month since July, with USD1.7 billion added in November. Flows into financials once again favoured US exposures, with European financials sector ETPs recording around USD0.3 billion of outflows – in line with the trend we have seen across the past few months.”
Commenting on the report, Laura Cooper, Senior Investment Strategist for iShares EMEA, BlackRock says: “Global ETP flows ramped up in November to nearly double the pace of buying a month ago and the strongest month this year, with USD127.5 billion added. The risk-on rotation was evident across both equity and bond flows with the former seeing the strongest month since December 2021, whilst fixed income saw a risk-on rotation from rates. High yield had its largest inflow month on record as investors chased the recent rally, fully unwinding the outflows seen in the asset class year-to-date. Once again, investors have selected ETFs to manoeuvre and implement this risk-on sentiment due to their precision and liquidity.”
