BlackRock Global ETP Landscape Report – April 2016

Global ETP flows reached $45.5bn in March. This was a result of a surge of $32.9bn inflows into U.S. listed ETPs, and $5.6bn in European listed ETPs following the largest monthly fixed income flows on record…..

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Marchioni Ursula – Head of ETP Research EMEA at iShares

Fixed income set a new quarterly record, with $43.8bn of inflows generated. In March 2016, fixed income amassed global inflows of $15.5bn, with European listed fixed income funds gathering a record $6.8bn.

EM equity ETPs had their best month in three years, generating $9bn in flows. While headwinds still remain for the category, ETP flow data suggests there were signs that negative emerging markets sentiment softened during the month.

Smart beta ETP flows hit a new monthly high generating $7.8bn. Strong asset gathering continued for minimum volatility funds with inflows of $3.2bn for the month, augmented by $1.3bn from factors and $3.3bn from dividend funds.

Equity funds brought in $25.8bn after a rare two consecutive months of outflows. This benefited all market caps, as well as dividend funds. U.S. equity ETPs recorded $18.3bn in inflows during March 2016, following the equity returns beginning to recover quickly from the middle of February. The exception to the overall turnaround for equity flows has been Broad Europe equity. March redemptions of ($8.4bn) were the greatest since the financial crisis.

Producing returns that exceeded those for most other asset classes, gold ETPs recorded its best quarter since Q1 2009, amassing $12.7bn. 

Ursula Marchioni, Chief Strategist, iShares EMEA at BlackRock commented: “Global ETP flows broke out after a slow start to the year. Fixed income ETP flows reached a new quarterly high, while smart beta funds hit a new monthly record and emerging market equity ETPs had their best month in three years.

“Global flows showed that investors had a clear preference for risky assets for the first time this year. Equities topped the ETP flow charts for the month, recording $25.8bn of inflows, driven by a strong rebound across equity exposures as global equity markets further stabilised and recouped most of the losses suffered during the first six weeks of 2016. 

“In Europe, a record month for European-listed fixed income funds led to $5.6bn of inflows into the European ETP category as a whole. Fixed income was the strongest category, accumulating $6.8bn. Credit ETPs were the main beneficiary, achieving ten times the average monthly flows with a monthly high of $3.9bn in inflows. Equities saw a second consecutive month of outflows as assets continued leaving European equity exposures. The recent euro strengthening versus the dollar, despite additional easing measures by the ECB, led European investors to rotate from domestic equity exposures into emerging equities and global credit.”

Asset classes: global ETP flows

Equities – strongest month for EM flows in three years

“Developed market equities led the charge, with US equities amassing $16.8bn inflows, but we also saw a shift in investor sentiment within the emerging markets. Inflows into emerging market equity ETPs reached their highest monthly level in the past three years at $9bn. A combination of factors including the recent U.S. dollar weakness, dovish U.S. Federal Reserve outlook and stabilising commodity prices, coupled with attractive valuations and extreme underweight investor positioning seemed to be driving investor enthusiasm for emerging equities. Around $2.2bn of inflows were registered across a wide array of single country exposures, suggesting that investors got more comfortable with idiosyncratic single country risks as well.”

Fixed income – record quarter

“Fixed income set a new quarterly record, with $43.8bn of inflows generated. The $15.5bn inflows into fixed income ETPs during March painted a risk-on picture. Investors demand for credit ETPs was strong, with $12.6bn of net inflows. A combination of strong inflows and yield compression have taken the total assets invested in global credit ETPs to more than $200bn for the first time ever. The March improvement in risk sentiment also drove outflows from government bond exposures to the tune of -$4.0bn. Most of the flows exited short-to-medium-term U.S. treasury as investors rotated from safe haven exposures into risky assets.” 

Monthly record for smart beta, and appeal of gold starting to fade

“Smart beta ETP flows hit a new monthly high generating $7.8bn. Against the backdrop of elevated global market volatility earlier this year, investors have increasingly sought exposure to low volatility strategies while staying invested in equity beta. This led to minimum volatility ETPs contributing $3.2bn in flows in March.

“The first quarter in 2016, saw gold ETPs reach their highest level of inflows since Q1 2009. The safe-haven appeal of gold seems to be fading away as bullion’s underlying returns were broadly flat for the month of March. Although investors put $2.7bn into gold ETPs during March, the pace of flows was moderate compared to the first two months of the year.”



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