BlackRock, the parent of the iShares, has published its latest ETP Landscape report, which in this edition looks back at 2017 – an extraordinary year for ETPs.

Patrick Mattar, a managing director within the iShares EMEA capital markets team

The key takeaways are as follows:

Global ETPs flows of $633bn represented 18% organic growth – the fastest growth since 2009 – and exceeded 2016’s flow record of $378.4bn by 67%, fuelled by flows across equity and fixed income.

U.S. equities brought in a new annual record of $196.1bn with tax reform prospects and economic growth driving flows to small-caps and a rotation into cyclical sectors.

Broad developed market equity funds collected a new high of $116.2bn spurred by favourable valuations and strong economic data.

Broad emerging market equities gathered $54.4bn in 2017, beating the previous record set in 2010 of $31.5bn, bolstered by stronger commodity prices and a weaker U.S dollar.

Meanwhile, fixed income funds captured $156.2bn, a new record and an increase of more than a third versus last year and marking new highs for investment grade corporate bonds, emerging market debt and U.S Treasury funds.

Patrick Mattar, a managing director with the iShares EMEA capital markets team, highlights five key stories behind the 2017 European ETP flows:

1. Spectacular rebound for Europe: There was a spectacular revival for European equities in 2017, as both European and US investors piled back in, adding $40bn over the year. A trend seen throughout the year was that as the dollar weakened versus the euro, US investors looked to Europe. Flows have broadly been flat during periods of dollar weakness, and have grown when the dollar has strengthened.
2. Golden opportunities: The enduring theme of the year within gold ETPs was the divergence in flow patterns between US-listed and EMEA-listed funds. US-listed gold ETP flows appeared relatively closely linked to the gold price in 2017, with investors reacting tactically to price moves in either direction. In Europe, on the other hand, investors invested fairly consistently throughout the year. September saw the only month of outflows this year from EMEA-listed ETPs suggesting that gold ETPs have been playing a more strategic role in European portfolios than in the US.
3. EM assets in vogue: 2017 was a stellar year for emerging market funds across the global ETP landscape, with inflows reaching $67.9bn, just $0.2bn behind the record EM inflow of $68.1bn in 2012. Domestic demand and local political situations appear relatively benign. The EM growth picture therefore seems largely healthy, posing few threats to these positive flows continuing into 2018.
4. Developed and diversified: A theme that endured throughout 2017 was investors in US-listed ETPs allocating to broad developed equities. In 2017, these US-listed funds added a staggering $100bn, a larger inflow than the whole of the European ETP industry across all asset classes over the same period.
5. Investing for good: 2017 was nothing short of a breakthrough year for sustainable ETFs. There has been a total $5.2bn added globally, the previous best calendar year inflow was $2.4bn. The old assumption that accessing sustainable investments in an indexed wrapper meant lower returns is being disproved by modern passive fund construction. Changing end investor attitudes and regulatory guidelines in European countries regarding ESG considerations may be contributing to EMEA-listed funds attracting more interest than US-listed ranges.