BlackRock ETP Landscape: 2020’s version of a summer lull led to a drop off in headline global ETP flows in August, to $54.3B, from c.$70B in July.
Global ETP Flows June 2020
Fixed income flows reduced for the third consecutive month to $21.8B, the lowest inflow month since March, while inflows into equity ETPs picked up to $24.8B, and buying in commodities fell to the lowest level this year with $4.1B of inflows.
Key themes in August:
- Inflating expectations: linkers on a roll
- Lacking conviction: equity flows mixed
- Precious metals fall: gold and silver flows drop
- Investors have continuously added to inflation linkers over the past four months, with August flows of $3.5B coming close to June’s record $4.4B of inflows as market attention picked up on inflation given the Federal Reserve’s Jackson Hole symposium. Investors have added $12.2B to inflation linkers since May, which in itself would be just shy of 2016’s annual flow record of $12.5B.
- These consistent inflows to linkers come amid two consecutive months of selling out of rates ETPs (-$4.3B in August) for the first time since late 2016, when investors sold rates ETPs for three consecutive months in the run up to and month of the US election.
- With record inflows to IG and HY so far this year, it would be remiss not to comment on the drop off in buying, with August marking the lowest inflow month for credit ($8.4B to IG and $2.7B to HY) since flows ramped up in April. To add a little perspective to this ‘drop’ in sentiment, the average monthly flow to IG between 2016 and 2019 was $3.6B, highlighting how monumental 2020 has been for credit flows.
- Investors have not added huge amounts of risk in the equity market: flows into global equities over the summer have gone up to an average of $23B per month, but with a large chunk allocated to broad DM equity, while flows into US equity have dropped off from the mammoth flows we saw in March and April. Just $9.3B was added to US equity in August, vs. the YTD monthly high of $27.5B in March, and following on from outflows in July.
- At the same time, investors have slightly cooled on Europe, with $0.8B of inflows into European equities in August – the lowest in three months. Buying in US-listed ETPs propped up the inflows, with EMEA-listed ETPs flat on the month, marking a change from July when EMEA-listed flows made up the vast majority of inflows.
- Conversely, EMEA-listed ETPs in EM were the only EM ETPs to gather meaningful inflows in August (+$1B), split fairly evenly between broad, regional and single country exposures. US and APAC-listed funds reversed July’s positive flows to lead the exposure net down to $1.7B, predominantly out of single country ETPs.
Precious metals fall
- Monthly flows into gold followed July’s record month by dropping to the lowest level of the year in August, despite market sentiment continuing to bolster, with $2.3B added, down from $9.4B in July. The precious metal is still on track for a record year, while silver flows also fell to $0.6B, the lowest level in four months.
- Investors sold out of EMEA-listed gold ETPs for the first time since November 2019 (- $0.7B), while flows into US-listed ETPs dropped by c.65%. Buying in APAC-listed gold remained steady at $0.5B. However, the trend of EMEA selling didn’t carry over to silver, where buying increased and helped make up a fall in US-listed flows.
- Crude oil flows remained negative for a third consecutive month, with outflows slowing to $0.7B. Despite investor conviction on crude oil faltering over the summer, flows into crude oil ETPs are still on track for a record year given the large amount allocated in March and April (over $17B), with YTD flows at $15.3B.