Highlights from BlackRock ETP Landscape report: March 2017

Global ETPs marked a trifecta of records this month: record monthly flows, record quarterly flows …

Patrick Mattar, from the capital markets team at iShares

and record year-to-date pace:

  • Industry growth: Industry annualised organic growth accelerated in March to 22% versus 13% for full-year 2016
  • Quarterly flows: 2017 Q1 flows (+$189.1bn) surpassed the previous quarterly flow record of $137.8bn from 2014 Q4
  • Year-to-date pace: Year-to-date 2017 flows are more than two and a half times larger than year-to-date 2016 flows
  • Global ETPs gathered $64.8bn, marking record year-to-date pace and new quarterly and monthly flow records
  • $30.9bn of inflows into European ETPs year-to-date; more than double the $13.3bn average flow figure seen by this stage since 2010.
  • U.S. equities led flows globally, weaker dollar lifted EM flows and fixed income flows remained resilient 

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

1. Equity dominance continues

“For the sixth month in a row, flows into European-domiciled equities funds (+$7.1bn) surpassed fixed income (+$2.7bn). This is the fifth largest ever month of inflows into equities. To put this into context, the previous six months is the largest ever six month period of accumulation for equity ETFs domiciled in Europe.”

2. Fixed income flows driven by EM debt

“EM debt inflows totalled $1.3bn in March, achieving the highest level of inflows of any category in fixed income. Both local and hard currency funds have generated significant inflows this year, against the backdrop of President Trump’s protectionist rhetoric. The attractive and relatively high quality yield have been key drivers of flows.”

3. US investors follow Europeans into Europe

“As geopolitical risks reduce and equity fundamentals improve, investors continue to move into European equities at pace. Both European-and US-domiciled funds have gathered assets every week since early February 2017. December 2015 and January 2017 combined, $39bn was withdrawn from US domiciled European equity funds, a reduction in the total asset base of 45%.”

4. The EM-pire strikes back

“Following the US election EM equity and fixed income ETFs saw large outflows driven by President Trump’s protectionist policies. This year that situation has reversed, with flows intensifying over March. The positivity towards EM is about more than just fixed income. Despite remaining $80m behind their pre-election AuM, European-domiciled EM equity ETPs have rebounded. This suggest that investors have focused more on the pull back in US dollar and the reduction in US Treasury yields, rather than the recent rate hike.”

5. Rivers of gold

“Following the US election, investors were selling their holdings in gold ETPs. This year, views have seemingly diverged by domicile. European investors have consistently added to Gold ETPs, with only two weeks this year in which there have been outflows and close to $1bn of inflows over March. Flows into gold funds domiciled out of Europe have been much less consistent, with some large outflows at the start of the month. This dynamic suggests European investors are currently more focused on portfolio diversification than those elsewhere.”

A growing theme: investing in robotics

Flows into robotics ETFs and mutual funds have accelerated significantly over the last 12 months, from an estimated $5.09bn to $8.95bn over this period, according to Bank of America Merrill Lynch. The four robotics ETFs globally (2 US, 2 European) grew from $415m at 31/12/2016 to $1.08bn at 31/03/2017 (Source: Bloomberg).

Investors are part of a wider phenomenon of interest in the robotics sector:

1.Searches for ‘Automation & Robotics’ have more than doubled over the last five years, showing an increase in global awareness (Source: Google Trends)

2.The global supply of industrial robots has been increasing steadily over the last 10 years, increasing from 60,000 to 254,000 since 2009 (Source: IFR World Robotics Report 2016)

3.The robotics theme is about much more than use in industry. Robot usage is growing in everyday life, with the worldwide number of domestic household robots set to increase to 31 million between 2016 and 2019 (Source: IFR World Robotics Report 2016)


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