Global ETP flows of $11.1bn in April, with European listed funds contributing $3.6bn in net flows….
Marchioni Ursula – Head of ETP Research EMEA at iShares
Fixed income flows deliver nearly four times the total of equity exposures at $8.4bn versus $2.2bn in net flows.
Emerging market debt and investment grade corporate bonds drive flows, generating $2.1bn and $4.5bn respectively
U.S. equities amass $11.5bn in flows for the month, but moderated from March following slowdown in GDP growth and stock market rally and the Fed remaining cautious. These were offset by $14.1 outflows from European and Japanese equity trackers – bringing the balance for developed market equity ETFs nearly flat.
Broad emerging market equity flows remain strong generating $3.1bn, and establishing the best two month total in over three years.
Smart beta ETPs record $7.2bn of inflows. Minimum volatility funds contribute $3.4bn, taking the year-to-date total for minimum volatility to $11.8bn and surpassing the previous full-year record of $11.6bn during 2015
Outflows from commodities for the first time in seven months. Gold records redemptions of ($0.3bn), whilst crude oil funds saw a second consecutive month of outflows ($1.0bn)
Ursula Marchioni, Chief Strategist, iShares EMEA at BlackRock commented:“Exchange traded product flows in April were dominated by flows into fixed income and emerging markets. Fixed income flows were four times that of equity exposures. U.S. and European credit were the strongest categories with total inflows of $4.3bn, followed by emerging market debt attracting $2.1bn. This was at the expense of U.S. treasuries which saw outflows of ($3.1bn) and European sovereign exposures recording outflows of ($2.2bn).
“Emerging market equities and debt continue to gather assets, adding $4.3bn in April. Emerging markets debt ETP flows started the year slowly, but as the year has progressed, they have improved along with the outlook for emerging equities. Meanwhile, broad emerging market equity funds remained popular, benefiting from a sluggish dollar, stubbornly low interest rates, and stabilising commodity prices.
“European-listed ETPs recorded $3.9bn of flows into fixed income as appetite and awareness continues to grow. The category has attracted $10.7bn in the past two months, nearly exceeding the inflows into U.S.-listed funds over the same period. This is particularly impressive considering U.S.-listed funds captured over 80% of flows in January and February and have a significantly larger asset base.
“Although the global ETP flows of $11.1bn in April was modest compared to the $45.5bn of inflows in March, investor adoption of ETPs continues to increase and it has been over two years since the last monthly outflow.”
Developed market equities in focus
“The more-dovish-than-expected Fed stance and the less-negative-than-expected earnings trend, supported by the recently weak US dollar, and led investors to become more positive in the near-term about US equities. $11.5bn flowed into the asset class, and builds on the strong run in March.
“Away from the U.S. however, developed market equities witnessed outflows of ($11.4bn), as investors redeemed record $6.3bn out of European and $7.8bn out of Japanese equity ETPs. In the case of Japanese equities, the selling was first driven by overseas investors but has now also involved domestic investors. This is due to a growing perception that the Bank of Japan has less firepower to surprise on the easing front. Progress on fiscal reforms could be the catalyst to bring Japanese equities back into focus.
“European equity outflows were driven by domestic and foreign investors with volatility in the euro and tightening financial conditions weighing on sentiment. European stocks still look attractive when considering continued earnings growth and macro expansion centred on private consumption. However, geopolitical risks need to be carefully monitored, considering the current political landscape, including the upcoming EU referendum in the UK and the repeat Spanish general elections.”