BlackRock ETP Landscape: Flows into global ETPs stayed fairly steady in September, at $53.2B, down from $55.5B in August and taking total flows in Q3 to $181.3B.
Global ETP Flows September 2020
Inflows over the course of the month showed a marked shift towards equities, which gathered $34.6B, while buying in fixed income fell to just $12.4B – the lowest level since June’s record inflows.
Commodity buying also dropped to $2.0B – the lowest monthly inflows of 2020 so far.
Key themes in September:
- Getting selective in Europe: European equity flows turn flat
- Credit check: credit falls out of favour
- Cyclical rotation: pick up in industrials flows
Getting selective in Europe
- Equity flows increased month-on-month throughout the third quarter, with the pickup in September driven by buying of US equity exposures. US equity inflows were split across US and EMEA-listed funds: the latter reached its highest level so far this year ($3.0B of inflows in September), while buying in US-listed US equity products ($12.2B) was at the highest point since the large-scale re-risking in April, and comes after a lack of conviction over the summer.
- Meanwhile, concerns over a second wave and associated growth repercussions contributed to a downturn in European equity flows to -$0.2B in September. This is the first time European equity flows have turned negative since June. Delving a little deeper, single country European equity ETP flows are actually positive YTD ($2.7B), and while broad European equity flows did appear to regain some momentum over the summer, this has tailed off and remains negative at -$0.2B YTD.
- EM equity flows totalled $5.3B for the quarter – the first positive quarter of flows since Q4 2019. Flows totalled $1.8B in September, and were tilted in favour of single country ETPs ($1.1B). The vast majority of these single country flows were driven by buying of China exposures – a theme that has persisted over the course of the quarter, including in August when flows turned negative.
- The fall in overall fixed income flows in September can be attributed to the near collapse of credit flows over the course of the month. Investment grade (IG) flows fell from $7.2B in August to just $0.6B in September, with outflows from EMEA-listed ETPs offsetting buying in US-listed products. IG flows have fallen significantly as a proportion of all fixed income flows this year: IG accounted for 42% of fixed income buying in Q2, dropping to 23% in Q3 as a whole, and just 5% in September.
- High yield (HY) flows turned negative for the first time since February, with $4.5B out. This came entirely from US-listed products; flows into EMEA-listed HY ETPs increased from $0.1B in August to $0.5B in September – a mirror image to the IG flows described above.
- Rates ETPs gained $4.5B of inflows in September, after recording net outflows in July and August. Rates buying was predominantly focused on USTs. A special mention goes to emerging market debt, which consistently gathered inflows in each month of the quarter, and added a further $2.1B in September, predominantly into China bonds.
- We are seeing the cyclical rotation play out through sector flows, with significant buying of industrials ETPs, totalling $2.2B in September – the largest monthly inflow since January 2018. At the same time, money flowed out of defensive sectors including healthcare and utilities, and tech inflows reversed midmonth to end the quarter with -$0.4B out.
- Buying in industrials and consumer discretionary ETPs was sufficient to offset outflows from all other sectors over the quarter, with sector ETPs gaining $4.0B in aggregate in Q3. This was the best quarter for sector flows since Q4 2016, when the last US election took place. In Q3 2016 and the run up to the previous election, sector flows remained fairly muted, with materials the most popular sector.
- This time around, tech and communications services flows remain the most popular sector over the quarter and the year but dropped to their lowest level since October 2019 in September, with just $0.6B of inflows, vs. $3.5B of inflows in August.