ETP Landscape: Fixed income etp flows surged in early february while equities recovered after a rocky start

– Global ETP inflows finished February at $27.2bn spurred on by Janet Yellen’s February 11th address to Congress, which was well received by equity markets…..

Russ Koesterich, BlackRock’s Chief Investment Strategist

– Fixed Income flows of $19.6bn set a new monthly record amid expectations for continued low interest rates and low inflation.
• US Treasuries brought in $11.4bn and Investment Grade Corporate gathered $3.6bn. High Yield Corporate added $1.4bn.
• Despite inflows into all duration buckets, Short Maturity funds had a record month taking in $7.4bn.
– Overall Equity flows were moderate at $5.8bn with investors continuing to favor non-US Developed Markets exposures.
• Japanese Equity inflows reached $4.1bn and Pan-European funds gathered $2.8bn as evidence continues to point toward improving growth in the region.
• US Equity outflows totaled ($0.2bn) and Emerging Markets shed ($4.5bn).
– February played out as a tale of two halves and ETPs enabled market participants to efficiently reallocate capital as sentiment shifted.
• Prior to Yellen’s remarks, Equity ETP redemptions reached ($21.2bn) while Fixed Income accumulated $16.8bn as investors waited out the equity market volatility that carried over from January.
• Subsequently, the trend reversed with Equities recovering $27.1bn (largely US Equity) while Fixed Income cooled but still brought in an additional $2.8bn.

Source: – BlackRock ETP Research

The Federal Reserve’s surprise September no-taper announcement removed some risk of near-term volatility and took some pressure off rate-sensitive assets. As a result, stocks rallied for much of the month and investors moved heavily back into Developed Markets Equity ETPs. Investors also began to warm up to Emerging Markets Equities.