Highlights from BlackRock ETP Landscape report: April 2017

Global ETP flows of $40.1bn in April brought assets close to $4 trillion…

Patrick Mattar, from the capital markets team at iShares

The industry has doubled in size in just over four years, thanks to record inflows of $228.6bn year-to-date and $524.5bn over the past twelve months

Non-U.S. equity flows exhibited the greatest momentum, reaching $15.2bn for the month driven by favourable outlooks for broad Europe and broad EM exposures

Investor demand for fixed income funds persisted, with flows of $11.6bn (4th straight month over $10bn) due to EM debt, investment grade corporate and U.S. Treasuries

Patrick Mattar, from the iShares EMEA capital markets team at BlackRock, comments on the five key stories behind the European ETP flows in April 2017:

Equity dominance continued

“For the seventh month in a row, flows into European-domiciled equity ETFs (+$1.29B) surpassed fixed income (+$1.27B). The margin was, however, much closer than in recent months. Over the previous 12 months there have been $40.2bn of flows into equity ETPs while bond ETPs took $21.6bn.”

Everybody’s buying Europe

“Flows into European equities continued, seemingly spurred on by the French election first round result and consensus-beating earnings numbers. $3.6bn was added to European equity ETPs in April, behind the $4.9bn added in March. April was the first month since October 2015 that flows into U.S.-domiciled European equity funds outpaced flows into European-domiciled equivalents – from December 2015 to January 2017, $39bn was withdrawn from U.S.-domiciled European equity funds.”

EM equity flows continued

“April was the third month in a row of flows into EM equity ETFs. This follows a three-month period of outflows following the U.S. election where President Trump’s protectionist rhetoric appeared to spook many ETF investors. Over the last two years, the MSCI Emerging Markets Index has been in negative territory (down -2.5%), with the flow pattern following the market return relatively closely.”

EMD continued to dominate in fixed income

“Emerging market debt inflows totalled $1.1bn in April, making it the largest flow category within fixed income – a position it has maintained every month so far this year. Both local and hard currency funds have generated significant inflows this year, contrary to market expectations given President Trump’s protectionist rhetoric. At yields of 5.4% and 6.2% respectively, the attractive yield premium over developed market exposures and the less volatile yield compared with high yield credit have kept flows coming back following a Q4 2016 sell off election-driven outflow period. At the same time, $1.1bn has flowed out of Euro investment grade year-to-date, exiting core European exposures with outflows increasing following the first round of the French election.”

Views diverged on US equities

“European investors were net sellers of U.S. equities, preferring instead European equity ETFs. U.S. equity exposures have taken $170bn in the six months since the U.S. election, the largest flow category in the global ETF space over this period. The $1.6bn outflow from European-domiciled U.S. equity funds in April was the largest outflow category of all within the European-domiciled space, and the largest monthly outflow from U.S. equities since March 2015.”


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