US and EM equity ETPs lead September flows, finds BlackRock

Oct 12th, 2017 | By | Category: Latest news

Global ETPs gathered $38.7 billion in net new assets during September, according to BlackRock’s latest ETP Landscape Report, with significant flows recorded for those offering exposure to US and broad emerging market equities.

US and EM equity ETPs lead September flows, finds BlackRock

Global ETPs gathered $38.7 billion in net new assets during September.

ETPs tracking US equities drew in $6.1bn, driven by renewed focus on tax and regulatory reform which supported rebounds in small-caps and financial sector funds, said BlackRock. Financial sector funds also bounced back from outflows last month to gather $1.6bn. US financials are on-pace for the best year of inflows since 2013.

Flows into broad emerging market equity ETPs accelerated to $3.9bn, marking a new annual record and the best monthly flows since May, despite modest US dollar strengthening. EM debt flows also accelerated to $1.1bn, propelling year-to-date flows to a record $15.9bn.

Net inflows into fixed income ETPs were also strong for the month at $12.7bn. Notably, US Treasury flows vaulted to $4.3bn, roughly half of which went into long-dated funds, despite a more hawkish tone in this month’s Fed’s announcement. High yield corporates also bounded back with inflows of $2.3bn. Strong demand for global fixed income ETPs has led to record flows into this category this year ($126.4bn).

Lastly, although the dollar weakened and uncertainty eased, gold ETPs took in $2.2bn, the best flows since February this year.

Overall, flows in Q3 reached $126.0bn, with year-to-date flows increasing to $458.0bn, exceeding 2016’s recorded flows of $378.4bn.

Europe-listed ETP flows

September was another positive month for EMEA-listed European equity ETPs, which recorded their 13th consecutive month of inflows, the longest run on record. However, Patrick Mattar, iShares EMEA capital markets team at BlackRock, notes that US investor appetite for European equities appears to be cooling.

“With the European growth outlook strengthening, it seems that currency is playing an increasing role in flows,” said Mattar. “US dollar gains in September might have encouraged US investors to return to domestic, USD-earning equities.”

September was the eighth straight month of inflows into EMEA-listed emerging markets ETPs with the majority of flows going into broad emerging markets exposures. Investors appear to be expanding the range of vehicles they use to access emerging markets. Mattar notes, “EM futures contracts are running rich, so investors could be considering using ETFs, as a cost-effective equivalent.”

September was the biggest-ever month of inflows (+$0.5bn) into EMEA-listed US financial sector ETPs which, according to Mattar, reflects “speculation that an imminent US rate hike will improve bank profitability.” The financials inflows were so high that even though all other sectors in aggregate had outflows, the net figure was still the second-largest ever month of inflows to EMEA-listed US sector ETPs.

September was the first month of outflows for gold ETPs since December 2016, breaking an eight-month inflow trend. BlackRock has previously highlighted the divergence between gold flows into EMEA- and US-listed ETPs but notes the trend was more pronounced in September than at any point this year, as US-listed gold funds enjoyed their best inflow month since June 2016. “It appears that US investors have focused on protecting portfolios over the last two months, whilst Europeans have increased allocations to risk assets and reduced exposure to gold,” said Mattar.

The robotics and automation theme continued to attract investor attention, with ETFs providing exposure to such companies experiencing their biggest month of inflows over September, adding $780m. At the start of 2017, the four ETPs tracking global robotics companies had a total AUM of $415m; today their combined AUM stands at $3.6bn.

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