Global exchange-traded fund flows remain ahead of the record year-to-date pace set in 2013 as $18.3bn flowed into global ETFs in May, bringing assets gathered to $123.8bn so far this year, according to a report from Blackrock.
ETF flows are on course for a record year according to a report from Blackrock.
Flows were concentrated in funds based on broad developed market equities (excluding the US) and Japanese equities, with pure European equity inflows cooling after a strong start to the year. Weak demand for US equities continued as investors increased their exposure to non-US developed markets due to their attractive valuations relative to US stocks.
Demand for non-US equities remains strong with broad developed market equities gathering $6.4bn in May. Continued momentum in Japanese equities and a renewed interest in emerging market exposure accounted for $5.8bn and $2.7bn of inflows respectively. US equity ETFs gathered only $0.4bn after heavy outflows in April. Pan-European flows were the lowest for six months with inflows of $1.6bn.
Currency hedged ETFs gathered $3.4bn in assets during the month. Non-US currency-hedged equity funds have received considerable attention from investors this year due to volatile currency markets and US dollar strength. In the year-to-date, $12.7bn has flowed into currency-hedged EAFE equity funds, considerably more than the $1.6bn gathered in the whole of 2014.
Commodities and fixed income ETFs saw modest outflows of around $100m and $700m respectively. However, fixed income flows remain ahead of 2014’s record breaking pace, despite investor concerns about the timing of US interest rate rises.
Ursula Marchioni, Head of ETP Research at BlackRock commented: “2015 has been so far dominated by two trends: outflows from US equity exposures and inflows into most of the other developed equity markets. ETPs giving exposure to Europe, Australasia and developed markets in the Far East have seen cumulated inflows of $35.8bn year-to-date – $4.2bn of which in May alone. Within this trend, Japanese equity ETFs have been particularly popular, as part of a stock market surge that’s pushed the Nikkei 225 to its highest level since 2002.”
She added, “Looking at the May monthly flows, our ETP data suggests that investors’ attraction for European equities might start to cool. Pan European equity funds continued to see inflows, but at a slower pace than over the past six months. The majority of inflows came late in the month, following news that the ECB could conduct its bond purchases earlier than anticipated.”