BlackRock Global ETP Landscape Report – February 2016

Highlights from January’s ETP flows data. ·Global ETPs gathered $13.9bn as investors contemplated heightened market volatility markets and falling global growth forecasts….

Marchioni Ursula – Head of ETP Research EMEA at iShares

·         Turbulence in global equity markets led many investors to safe-haven assets such as developed government bonds, with U.S. Treasury ETPs generating inflows of $9.1bn. This was the third-highest monthly inflows into U.S. Treasury ETPs in the last five years and seems to challenge the highest-ever full-year inflow of $14.4bn accomplished in 2009.

·         Anticipated central bank stimulus in Japan and Europe prompted inflows to Japan and European equity funds of $5.2bn and $2.4bn, respectively.

·         U.S. equity ETP investors shed $11.2bn, reducing exposure to economically-sensitive and ‘high-beta’ sectors, such as mid / small caps (-$3.4bn) and cyclical sectors (-$3.5bn), in particular. Despite this, 2016 outflows year-to-date are less severe than in January 2015 when U.S. equity funds shed $18.4bn. Minimum volatility products generated $1.3bn, predominantly led by investor demand for U.S. equity exposures.

·         In Europe, comments from the European Central Bank led to $1.8bn of flows into broad European equity ETPs. U.K. equity funds attracted $821mn. Sovereign bonds were preferred by investors as a risk-off tactical adjustment. The category saw inflows of $1.4bn. However, these were partially offset by outflows in the credit space (-$663mn).

·         Commodity funds gathered $4.3bn, the strongest month since February 2015. Flows were fueled by demand for crude oil and gold products, each recording inflows of $2.8bn and $1.9bn respectively.

Sven Württemberger, Head iShares German-speaking Switzerland, commented:

“After a record year of ETP flows in 2015, with unprecedented growth in Equity and Fixed Income passive adoption, a broadening investor base reaching from institutional to private investors, January has been a month reversing the prevailing positive trend. Starting the new year with global equity markets plunging double digits, the Oil price hitting lows previously seen in the early 2000 and accelerating losses in Emerging markets, have caused volatility again to spike and driving investors out of capital markets. Nevertheless Swiss institutional as well as private investors have weathered stormy markets leveraging opportunities by investing in global equity exposure, tactically allocating into fixed income markets, predominately Euro Corporates, with some even utilizing growth aspirations in Emerging Markets Fixed Income – manly hard currency corporates and high yield. Rule-based investing, especially risk-adjusted, i.e. minimum volatility strategies have again proven to be successful in cushioning downwards moving markets. After all, Gold seems to be back on vogue, with investors looking to diversifying their portfolio and after a long phase of absence now increasing their pressure metals allocations.”

Ursula Marchioni, Chief Strategist, iShares EMEA at BlackRock commented:

“January 2016 flows were even higher than the 2015 figure as investors used ETPs to express investment views in turbulent markets. A catalogue of uncertainties during the month, ranging from falling crude oil prices and a lower world economic growth outlook, saw global investors shed some risk from their portfolios and turn to safe haven assets. There was a notable swing away from US equities, with over $11 billion flowing out of the asset class, compared to over $26 billion of inflows in December 2015 alone.

“Interestingly, global flows into commodity products suggested some contrarian investors believe energy prices could have sold off too far, with commodity products recording their strongest month of inflows since February 2015. Gold and energy based exposures led the charge of flows into this sector.

“Despite significant volatility in the equity markets, not all ‘risk-on’ assets recorded outflows. This trend was particularly pertinent in Europe, where equities were the flavour of the month in the region. European-listed products recorded $3bn of inflows. This demand was driven by hints from the European Central Bank to loosen monetary policy, which led to increased optimism among investors about the region’s economic outlook.”



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