International equity ETFs in favour during April, finds BlackRock

May 11th, 2017 | By | Category: ETF and Index News

Flows into non-US equity ETFs were robust during April, reaching $15.2bn for the month, driven by favourable outlooks for broad Europe and emerging market exposures, according to BlackRock’s latest ETP landscape report.

International equity ETFs in favour during April

BlackRock has reported that $15.2bn flowed into non-US equity ETFs during April.

Global investors poured money into ETFs tracking European risk-on exposures with $3.6bn added to European equity ETPs in April, behind the $4.9bn added in March.

Patrick Mattar, part of the iShares EMEA capital markets team at BlackRock, commented: “Flows into European equities continued, seemingly spurred on by the French election first round result and consensus-beating earnings numbers. April was the first month since October 2015 that flows into US-domiciled European equity funds outpaced flows into European-domiciled equivalents – from December 2015 to January 2017, $39bn was withdrawn from US-domiciled European equity funds.”

Flows into emerging markets equities continued for the third consecutive month with $3.9bn flowing into broad emerging markets equity ETFs. The strong net gatherings confirmed a change in investor sentiment regarding the asset class compared to the beginning of the year, as Mattar notes: “This follows a three-month period of outflows following the US election where President Trump’s protectionist rhetoric appeared to spook many ETF investors.”

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

Investor demand for fixed income funds persisted in April with flows of $11.6bn marking the fourth consecutive month where net gatherings exceeded $10bn. Net flows of $2.3bn into emerging markets debt, $2.1bn into investment grade corporate bonds and $2.0bn into US Treasuries were the most significant asset classes in demand during the month.

“Emerging market debt inflows represented the largest flow category within fixed income – a position it has maintained every month so far this year,” said Mattar. “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.”

The report also found that views diverged on US equities depending on investor location. European investors were net sellers of US equities, preferring instead European equity ETFs.

“US equity exposures have taken $170bn in the six months since the US election, the largest flow category in the global ETF space over this period,” said Mattar. “The $1.6bn outflow from European-domiciled US equity funds in April was the largest outflow category of all within the European-domiciled space, and the largest monthly outflow from US equities since March 2015.”

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