Fixed income ETPs gathered $35.2 billion in net new assets globally during May, the second-largest monthly inflow for the asset class on record, according to BlackRock’s latest Global ETP Landscape report.
Fixed income ETPs recorded their second-largest monthly inflow in May.
Buying activity was driven by strong demand for investment-grade and high-yield credit exposures which took in $12.3bn and $7.7bn in new money, respectively, although inflows for both segments were down on record highs set in April.
Investors from different geographical regions displayed varying appetites for credit ETPs. EMEA investors have invested in eurozone and US investment-grade credit in almost equal measures for two consecutive months; however, US-based investors have displayed more of a domestic bias.
Although the vast majority of May’s inflows into high-yield ETPs were focused on US-listed products, buying activity in EMEA-listed high-yield ETPs increased to $1.5bn. These inflows into EMEA-listed high-yield ETPs are building momentum following the $1.1bn that was gathered in April and coming after a torrid couple of months that saw outflows totaling $5.2bn in February and March.
While credit ETPs accounted for the majority of fixed income net inflows in May, increased buying of aggregate bond ETPs contributed significantly to growth at headline level. Aggregate bond ETPs, which track broad multi-sector bond indices, gathered $7.4bn in May, up from $2.7bn in the previous month. This offset falling inflows into rates ETPs which gathered $2.7bn, the segment’s lowest monthly inflow since November 2019.
ETPs providing exposure to emerging market debt registered $0.6bn net inflows over the course of the month with investors showing a clear preference for hard currency (+$1.1bn) over local currency (-$0.5bn) bonds.
Flows into equity ETPs globally were essentially flat in May with $79 million net outflows recorded; however, investors notably diverged in their focus on different regions.
Emerging market equity ETPs suffered net outflows of $9.5bn, while European equity ETPs saw redemptions to the tune of $2.6bn. Emerging market equity ETPs have not seen a month of positive net inflows since January with investors indiscriminately selling out of both broad market and single country exposures.
Conversely, US equity ETPs recorded $3.8bn net inflows, although this was notably down from the $18.3bn gathered in April. Japan equity ETPs received $9bn in new money with about half of this capital coming from Asia-listed funds and driven by purchases from the Bank of Japan.
Flows into sector ETPs remained elevated. Technology took the mantle from healthcare as the most popular sector in May with $5.2bn net inflows, up from $4.1bn in April. Inflows into healthcare ETPs dropped from a record $7.3bn in April to $4.3bn in May. Meanwhile, utilities and consumer staples, traditionally defensive sectors, had outflows totaling $1.0bn.
ETPs targeting quality companies were the only factor ETPs to gain net inflows in May with $1.1bn added. Value flows were flat despite a pickup in the last week of the month which coincided with a revival in sentiment towards the factor.
Commodity ETPs gathered a sizable $10.7bn in May, although this was notably down from April’s record month of $21.4bn net inflows. Crude oil ETPs registered just $0.9bn of net inflows compared to $11.4bn in April as oil price volatility dampened and investors moved away from tactical buying.
Precious metal ETPs drove overall net buying in commodities. Flows into gold ETPs dropped a little to $7.7bn with most of the buying focused in US-listed ETPs, although inflows into EMEA-listed products increased to $2.2bn.
Inflows into silver ETPs totaled $1.2bn in May, a triple increase from the previous month and the largest monthly inflow on record, demonstrating how sentiment towards silver often lags gold.