Investors put their money into safe-haven assets in February amid ongoing economic uncertainty, according to BlackRock’s latest landscape report.
Research from the asset manager showed that the global exchange traded product industry gathered $9.4bn last month, with the majority of flows going into US treasuries and gold-based ETPs, at $5.7bn and $7.2bn, respectively. However, total inflows were offset by investors pulling out of US and European equity ETPs to the tune of $8.8bn and $4.2bn.
BlackRock’s figures show that investors abandoned US and European equity ETPs during February to the tune of $8.8bn and $4.2bn respectively.
Investors tend to turn to safe haven assets, such as gold, during times of uncertainty. It serves as a return diversifier when investors want to de-risk portfolios.
In the smart beta space, minimum volatility fund flows climbed to a record $3.9bn for the month and over $5.3bn for the year.
Ursula Marchioni, Chief Strategist, iShares EMEA at BlackRock said in a statement: “Recessionary fears kept investors on edge in February, leading them to flock to risk-off exposures and sell developed equities. The month saw records for gold-based and minimum volatility products, and US equity ETPs recorded a second consecutive month in outflows, shedding $19.5bn year-to-date. So far this year investors have shown a preference for safer haven assets with US treasuries and gold already ahead of their 2015 flows, generating a combined $24bn in the first two months.
Europe-listed ETPs saw net gatherings of $2.6bn during February. The report showed that net demand for US Treasuries and European sovereign bonds, recorded $600m and $900m, respectively but this was offset by developed equity outflows of $1.7bn. Conforming to global trends, gold was the most in-demand asset category for European investors as the report shows net inflows of $2.4bn for the yellow metal during the month.
“Weaker macro data, lacklustre earnings in the final quarter of 2015 and ongoing concerns around Brexit, meant risk-off sentiment also gripped European ETP investors in February,” notes Marchioni. “Of the $2.6bn of new flows recorded in European-domiciled ETPs, we saw a turn in the tide among investors. Having been the most popular asset class in January, equities recorded net outflows for the month. Instead European investors became aligned with global markets and were more risk averse. This led to gold being the flavour of the month among European investors, recording $2.4bn in assets, followed by government bond funds.”
In other markets, Japan attracted $2.3bn of inflows, and Canada-listed ETPs drew in $1.0bn, fuelled by equities and fixed income, extending a two-year run of inflows to the region. Broad emerging market ETPs shed $0.4bn although the Asia-Pacific region showed strong demand with net gatherings of $5.7bn, powered by gains in South Korea and China.
Crude oil funds brought in $1.2bn on speculation of potential production cuts by OPEC and non-OPEC countries.