Despite setback for gold, global ETP flows remain ahead of last year’s record pace

May 5th, 2013 | By | Category: ETF and Index News

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Global inflows into exchange-traded products (ETPs) slowed a little in April 2013 to $10.3 billion, according to the latest ETP Landscape report from BlackRock, the parent of iShares. However, as of April month end, ETPs have seen inflows of $79.9 billion in the year to date (YTD), which is more than $13 billion ahead of the $66.3 billion of inflows collected during the same period last year.

Despite setback for gold, global ETP flows remain ahead of last year’s record pace

Despite a setback for gold ETPs, which have lost $17.9 billion YTD, global ETP flows remain ahead of last year’s record pace.

Fixed income ETPs continued to appeal to investors in April, with inflows of $9.5 billion, their best month since May 2012. Within the asset class, flows into US Treasury ETPs picked up with $2.2 billion, although short maturity ETPs continued to attract the majority of fixed income flows with $5.6 billion for the month.

Flows into shorter duration products show investors are continuing to position themselves for a potential rise in interest rates. Products such as the Vanguard Short-Term Corporate Bond ETF (VCSH) and iShares 1-3 Year Credit Bond ETF (CSJ) have been beneficiaries of this trend.

Inflows into equity ETPs cooled a little, at $9.6 billion for the month, as investor sentiment shifted in response to recent moderation in economic growth expectations. Within equities, developed market products led the way with $13.1 billion of flows, followed by dividend income with $3.4 billion and low volatility with $2.5 billion

Inflows into Japan equity ETFs maintained momentum in April, accumulating a further $4.8 billion as authorities there reaffirmed their commitment to stimulus. The laggards within the equities space were US large-cap products, with inflows of just $1.7 billion amid lacklustre reports on US and Chinese economic growth, and emerging markets products, which saw outflows of $3.5 billion.

Alternatively weighted products, such as those weighted by dividends or volatility, were once again relative strong performers. So far this year non-market capitalisation weighted products have captured 42% of equity ETP flows YTD, more than two times their share of equity assets; dividend-oriented products have accumulated $10.9 billion, while low-volatility products have added $6.5 billion.

There are now 35 minimum or low-volatility equity ETPs available globally, which together hold $13.2 billion in assets. Among the largest and most popular are the PowerShares S&P 500 Low Volatility Portfolio ETF (SPLV) with $5.5 billion and the iShares MSCI US Minimum Volatility ETF (USMV) with $3.7 billion.

The biggest negative among any asset class over the month was gold, with ETPs linked to the precious metal stomaching outflows of $8.7 billion. The outflows were primarily driven by lower US inflation expectations, a disappointing Chinese GDP report and rumours of potential gold reserve sales by distressed European countries. Outflows from gold ETPs are now at $17.9 billion YTD, with the SPDR Gold Shares ETF (GLD) contributing $13.4 billion of this.

Despite significant outflows from gold commodity ETPs, gold equities ETP flows just about remain positive at $100 million YTD. Total assets in products linked to gold miners stood at $9.6 billion, ten times less than gold ETPs which held $105.7 billion at the end of April. For investors looking for exposure to gold without holding the physical asset, whether for tax considerations or to earn additional income, gold mining ETPs can be an option to consider.

The best performing new launches during April, in terms of assets gathered, were the China Southern Kaiyuan CSI 300 Index ETF (159925), the Yinhua Traded Money Market Fund ETF (511880), the SPDR Blackstone/GSO Senior Loan ETF (SRLN), the iShares MSCI USA Momentum Index ETF (MTUM) and the iShares MSCI USA Risk Weighted Index ETF (SIZE).

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