Global exchange-traded products experienced $39.8bn of net inflows during August with $26.7bn flowing into equity-based products as investors continued to favour risk-on assets, according to the findings of the latest ETP Landscape Report from asset manager and ETF issuer BlackRock.
Ursula Marchioni, Chief Strategist, iShares EMEA.
Ursula Marchioni, Chief Strategist, iShares EMEA, commented: “There was no August lull in the ETP landscape, with flow volumes still going strong at $39.8bn. July and August saw a total of $95bn of inflows into global ETPs, making Q3 the strongest quarter of the year so far, and that is without September’s data.”
Within equities, investors favoured US ($16.6bn), followed by emerging markets ($5.7bn) and broad developed market exposures ($4.1bn). European equity exposures failed see revived demand, shedding $4.0bn in net flows for the month, bringing total net outflows for the year to $34.7bn. Pan-European equities shed $2.7bn and German equities shed $1.1bn as earnings continued to deteriorate and inflation remains stubbornly low.
European-listed equity ETPs, however, experienced positive net inflows during the month, the first since the announcement of Brexit. Although the positive flows suggest a return to risk-on sentiment for the region, closer analysis reveals that caution remains at the forefront of investors’ minds.
Marchioni explained: “Within the European ETP Landscape, flows in August meant equity ETP inflows for the year have returned to positive levels. This is a clear indicator of investors starting to become less risk averse, following recent post-Brexit market volatility. At the same time, investor demand for smart beta strategies continues with $3.4bn of inflows this month. Within European equities specifically, whilst broad European equity funds continue to witness large outflows, European factor funds have gathered net inflows. This divergence suggests that when investors start to reallocate back to European equities, they do so taking a precautious and selective view, rather than going into broad market exposures.”
Fixed income ETPs gathered $11.6bn of inflows, concentrated around three key exposures: US investment grade corporates ($5.0bn), emerging market debt ($1.9bn) and broad market ($1.6bn).
Marchioni said: “Emerging markets, across both equity and fixed income, stole the show this month. A benign Dollar, stable oil and decent data in China, coupled with positive signs from the earnings side, explains why ETP equity flows into this sector show no sign of abating. For fixed income, the search for yield which is on-going globally is also a strong supportive point.”
Having started the year as the most in demand asset class, commodities have witnessed a drastic slowdown in flows netting just $0.6bn in new gatherings during August. Gold continued to attract investor interest with $1.0bn of inflows while $0.4bn flowed out of ETPs tracking crude oil.
“Over the past six months, gold has been a standout for ETP flows. With over $1bn of inflows into gold in August, it is worth noting that this is half the amount that was recorded in July and a quarter of that witnessed in May and June. Despite the recent fall in the gold price, we still consider gold to be attractive from a diversification perspective.”
Global ETP assets reached $3.355tn as of the end of the month. This consisted primarily of $2.401tn in US-listed ETPs, followed by $561m in European-listed ETPs and $300m in ETPs listed within the Asia Pacific region. Equities commands the lion’s share of assets with $2.553tn, while fixed income and ‘commodity & other’ exposures have $605m and $196m in dedicated assets respectively.
Source: BlackRock.