BlackRock ETP Landscape: The summer lull looks to be in full effect, as flows into global ETPs in July hit their lowest level since October 2020 with $75.5B added, down 45% on June’s $135B.
Global ETP Flows July 2021
- The fall in headline figures was due to equity flows more than halving to $51.9B, while fixed income flows rose to $24.3B – the highest level in three months – and commodity flows remained relatively flat.
- Despite the drop in headline flows, buying in global ETPs in 2021 has now surpassed 2020’s annual total, with $769.2B added YTD vs. $757.9B for all of 2020.
Key themes in July:
US equity flows dip
- A drop in US-listed US equity flows is almost entirely responsible for July’s fall in equity flows, with net inflows of $20.6B significantly down from the $67.5B added to US-listed US equity in June, which was the second-highest inflow month on record for the exposure. Flows into EMEA-listed US equity ETPs dropped slightly to $2.8B (vs. $3.4B in June)
- The inverse was true for European equity ETPs, where buying fell to the lowest level since January 2021 ($1.3B, vs. $6.2B in June). In European equity, the larger drop in flows came from EMEA-listed ETPs, which contracted 84% MoM to just $0.3B, while US-listed flows fell 79% to $0.9B.
- Emerging market (EM) equity was a relative bright spot in July, with flows increasing to $3.7B (vs. $0.5B in June), while Japanese equity flows also picked up to the same figure. Within EM equity flows, APAC-listed exposures recovered from the $4.5B out in June with $1.4B added in July, offsetting the fall in EMEA-listed flows from June’s net buy of $1.7B to a net sell of $0.2B in July. Single exposure ETP flows outpaced broad EM, reversing last month’s trend, with investors allocating to China equity.
- Flows into inflation-linked bond ETPs set a new monthly record in July ($4.5B) in July, surpassing the previous record set in May ($4.4B). In line with the trend we have seen so far this year, July flows largely went into US inflation linkers, but investors continued to allocate to global and eurozone linkers as well, albeit at much lower levels – $0.1B and $0.2B, respectively.
- Buying in linker ETPs has now hit $26.1B for the year, more than the annual inflows into the exposure from 2018-2020 combined ($23.6B).
- Elsewhere in fixed income, rates continued to be popular with inflows of $4.7B, while EM debt ETP inflows hit the highest level in three months, with $3.2B added. Buying in credit remained muted, with the $0.8B added to investment grade (IG) offset by the $1.1B out of high yield (HY) exposures.
Tech on a high
- The quality tilt in sector flows that we highlighted in June carried over into July, with tech flows up to $5.4B – the highest level since February’s record $13.4B – and healthcare flows rising to $4.3B – the highest level since the record $7.1B added in April 2020. This has come at the expense of cyclical sectors, with energy, financials, materials and industrials all registering outflows – the first time since May 2019 that all four sectors have simultaneously seen a net monthly sell.
- Delving deeper, tech flows predominantly went into US exposures ($2.7B), while China tech notched up a record inflow month with $1.9B added. US exposures also accounted for $3.3B of all healthcare flows, and $3.2B of the $3.3B outflows from financials.
- Quality factor ETPs hit a record $2.9B in July, smashing the previous record of $2.5B set in January 2019. While value flows succumbed to the rotation with record outflows of $1.6B, YTD inflows into value are still on track to be a record with $17.7B added so far in 2021 (vs. the standing record of $6.7B in 2020).
Sustainable ticks up
- July saw a significant pickup in sustainable flows, with net inflows for US and European-listed ETPs up to $11.7B for July (vs. June’s $8.7B). This made it the fifth-largest NNB month on record, following the four months from November 2020 – February 2021.
- The bulk of July’s sustainable flows came from EMEA, with $8.8B added to sustainable strategies. These were dominated by ESG best-in-class and ‘Factors + ESG’ focussed strategies, which brought in $3.9B and $3B, respectively. Within ESG best-in-class, US ($930m) and global equity exposures ($518m) led the way, while European fixed income ESG saw a net buy of $378m.