BlackRock ETP Landscape: Despite elevated market volatility off the back of coronavirus-related shutdowns, global exchange-traded product (ETP) flows remained positive in March ($17.2B) – albeit at the lowest level since August 2019……..
Global ETP Flows January 2020
Fixed income suffered its largest monthly outflow on record – and the first since June 2015 – with $34.5B out across global ETPs. In contrast, commodities had their largest monthly inflow on record ($11.7B).
Inflows of $35.3B into equity ETPs indicate little capitulation in equity flows thus far, and recouped the outflows that came at the end of February.
Sustainable flows also continued, with $14.6B added, following on from the $23.5B added in February.
Key themes in March:
1. Back in credit: inflows return to credit into the end of the month
2. Staying home: equity flows display a clear domestic bias
3. Gold, silver and black: record inflows into commodities
Back in credit
- Indiscriminate selling of fixed income ETPs at certain points in March led flows lower across the month, as investors sought to use ETPs as liquid vehicles for accurate market pricing amid a lack of liquidity in the underlying market. Despite elevated market volatility, trends did start to emerge with money returning towards the end of the month.
- Credit ETPs have had a rollercoaster period: investors sold out of globally-listed high yield (HY) and investment grade (IG) consistently from the last week of February through to midMarch (-$30B). This started to reverse into the end of March as central bank easing – including corporate bond purchases in Europe and the US – supported sentiment towards credit. From 22 March, investors added $8.6B into euro and USD IG exposures) and $2.5B into HY, bringing the monthly totals to -$7.1B and -$0.8B, respectively.
- Rates ETPs had increased flows week-on-week, culminating in the second-highest weekly inflow on record ($9.2B) in the second week of March at the height of the flight to safety. The exposure was then sold in the second half of the month amid indiscriminate outflows, which resulted in a monthly inflow figure of $9.4B (following on from $10.5B added in February).
- Investors added to risk in March – albeit selectively, with a significant domestic bias within US and European equities. Among US equity ETPs, US-listed products gathered $31.8B, while EMEA-listed products lost $7.0B. Within European equity, inflows into EMEAlisted ETPs totalled $3.1B, reversing two months of outflows, while US-listed counterparts registered $3.9B of outflows, reversing two months of modest inflows.
- US equity flows were focused in large cap exposures, although small caps also gained inflows ($1.9B). In contrast, investors in European equities sold small caps (-$0.6B). Equity sector flows continued to go into technology, healthcare and energy, while financials remained unpopular. Utilities – a bond proxy sector – had outflows for the first time this year, predominantly from US equity products (-$0.8B), with European utilities registering small inflows of $11m.
- Inflows of $8.9B into Japanese equities were exclusively into APAC-domiciled funds, and included $14.4B of purchases by the Bank of Japan, which were ramped up in March and implies that domestic investors sold the exposure. Similarly, within emerging markets, outflows of $1.1B over the month masked an underlying home bias, with selling out of US and EMEA-listed funds contrasting with buying in LatAM and APAC-listed funds.
Gold, silver and black
- Despite gold coming under pressure from investors looking to cover liquidity concerns in other asset classes over the course of the month, gold ETPs gathered $7.7B in March – their second highest monthly inflow on record. This includes a record $5.2B added in the penultimate week of the month, driven by a return to buying in US-listed gold ETPs, which had lagged EMEA-listed flows up to that point. Investors also added $0.5B to silver ETPs.
- March was also a record month for crude oil ETPs, which gathered $6.1B, compounding the $2.2B added in February. The ongoing supply dynamics between Saudi Arabia and Russia do not appear to have deterred investors, who have increased their buying in crude oil every month this year.