BlackRock ETP Landscape: February global flows: record equity flows, a barbell approach to sectors, and credit out of favour
Global ETP Flows February 2021
Total flows into UCITS ETPs remained at a similar level to the previous week, with $3.1B of net buying.
However, the asset allocation story was very different, with equity climbing to inflows of $5.5B, while commodities and fixed income saw outflows of $622m and $1.8B, respectively.
Equity flows set the standard
February 2021 marked the largest inflow month for global ETPs on record, with $131.7B added, beating the previous record set in November 2020 ($126.5B). In line with what we saw in November, buying was driven by inflows into equity ETPs ($108.1B) amid outflows from commodities (-$2.5B – primarily out of gold) and fixed income (FI) inflows of $19.4B.
Investors used rates-driven market volatility in February as an opportunity to add to risk, with the second largest inflow month for US equities on record ($61.7B) – a huge jump vs. January’s flows of $3.5B, and just shy of November 2020’s record $65B.
Sector flows show a barbell approach to investing
Amid this record-setting month for flows, investors showed increased specificity with a significant pickup in global sector flows. February marked a record inflow month for financials ($9.3B) and materials ($2.4B), which have been popular alongside industrials and energy as cyclical and growth-geared sectors.
At the other end of the sector spectrum, tech flows also hit a record $13.5B in February, vs. $8.6B in January.
Quality-tilted sectors have continued to be popular with investors: healthcare flows, for example, returned to positive territory with $0.7B added in February, while traditional bond-proxy sectors like utilities and consumer staples were outliers in registering small outflows.
Credit out of favour
Global fixed income flows for February highlighted a disparity vs. equity, pointing to a lack of conviction in rate-sensitive exposures. HY notched up a second consecutive month of global outflows, with -$1.3B of net selling, while global investment grade inflows of $4.3B went almost entirely into EMEA-listed ETPs and masked outflows from US-listed IG ETPs.
On the whole, global credit flows have lacked a clear trend since September, following a bumper $90B added to IG and HY between April and August 2020, driven by immense policy support – since then, IG and HY have recorded just $7B of net inflows. There is one bright spot, however, with EMD remaining popular within FI. EMD has seen consistent inflows, with $2.2B added in January and a further $1.4B in February (including $1.4B into China bond ETPs), continuing the inflow trend we have seen in every month since March 2020.
- Equity flows: DM buying soars, with European equity hitting 12-week high
- Sectors and thematics: record flows into financials in line with the cyclical rotation
- Equity strategies: increasing demand for value across European and global exposures
- Commodities: strong outflows from gold but increasing demand for broad commodities
- Fixed income: outflows led by IG and EM hard currency debt, while inflation sees positive flows