Global ETPs on record year-to-date pace as reflationary trends drive best-ever February flows…..
Patrick Mattar, from the capital markets team at iShares
February 2017 saw two records in global ETP flows: it was the best February for asset gathering, leading to the highest year to date flows on record.
Global ETPs brought in $62.9bn during the month, largely fuelled by strength in U.S. equities. Year-to date figure stands at $124.2bn.
Flows into European ETPs reached $19.8bn year to date, making it the second largest ever February.
Patrick Mattar, from the iShares EMEA capital markets team at BlackRock, comments on the five key stories behind the European ETP flows in February:
1. Equities breaking out?
“Over the past year, there has been $29.1bn of flows into equities while fixed income took $28.3bn. To put this into context, this is the first time since May 2016 that equity flows have surpassed fixed income on a rolling 12 month basis, which could be a sign of the start of a prolonged revival for equity flows.
2. Geopolitics driving fixed income flows
“Emerging market debt inflows totalled $1.3bn in February, which was the largest inflow within fixed income. The drivers behind this were predominantly geopolitical: US Dollar and rate stabilisation expectations drove inflows into EM debt and US Investment Grade ETPs respectively. However European investment grade ETPs experienced outflows, which may be due to fears surrounding the French election.
3. Reflation in factors and sectors
“Since the US election, there has been a clear rotation from low volatility ETFs towards pro-cyclical factor exposures that tend to outperform in strong macro environments. Value has taken the bulk of the factor flow in Europe. This theme was apparent across all domiciles for US sector ETFs. For example, there were large flows into cyclicals (financials and materials) and outflows from defensives (healthcare and utilities).
4. Small is beautiful in Europe
“Flows into European mid-and small-cap equities (+$303m) surpassed large-cap flows (+$246m). After an unprecedented period of outflows from February to October 2016, European large-cap equities had been staging a comeback over the last three months but this slowed over February. It is only the second time ever that, in a month where both European large caps and small caps received inflows, small caps gathered more assets. This reflects a global investor trend favouring domestic exposures, potentially reflecting fears around the decline in globalisation.
5. Japan: Europeans pro, Americans less so
Looking at flows into Japanese equities coming from outside of Japan, there is an interesting dynamic: European investors have been buying while US investors have been selling. There has been a steady pickup in European investor interest year to date following a period of outflows in 2016. This could signal investor confidence in the Bank of Japan’s commitment to easing, and a stellar earning season could be drawing European investors back to Japan.”