Fixed income drove ETP buying in July

Aug 14th, 2020 | By | Category: Fixed Income

Exchange-traded products recorded $69.5 billion net inflows in July, following on strongly from the $71.5bn monthly inflow record for 2020 set in June, according to BlackRock’s latest Global ETP Flows report.

Fixed income continues driving ETP buying in July

Fixed income continued to drive ETP buying in July. (© REUTERS/Brendan McDermid/File Photo)

Fixed income ETPs were once again the most in-demand asset class, attracting $42.1bn in net new assets, although this was slightly down on the previous month’s record-breaking $46.7bn net inflows.

Amid lighter volumes heading into the summer, buying in investment-grade credit ETPs fell from $21.6bn in June to $10.8bn in July.

Demand for high-yield ETPs and broad market credit ETPs both increased, however, with $7.3bn and $12.5bn net inflows respectively.

Buying in emerging market debt ETPs remained fairly steady at $1.8bn. US- and APAC-listed ETPs drove the bulk of these inflows, while the contribution of EMEA-listed ETPs fell to its lowest level in three months with just $0.2bn added. Flows continued to overwhelmingly favour hard currency ETPs, a trend that has persisted since April.

Government bond ETPs recorded their first outflows since February 2019 with $1.3bn net redemptions, reflecting the scarcity of opportunity in the segment with rates already at record lows. Outflows were largely driven by selling of US government exposures (-$1.7bn), while several other single-country government bond ETPs also bled assets including Spain, Germany, France, and the UK. Buying across peripheral eurozone countries, in particular Italy, as well as global rate exposures helped to temper outflows.

Equity ETPs gathered $18.2bn in July as investors continued to seek risk-on exposure despite the threat of a second Covid-19 virus wave disrupting markets.

Positive net inflows returned to emerging market equity ETPs for the first time since January with $2.0bn added globally. US-listed ETPs accounted for over half of total demand, although money was added to the segment across all listing regions. Single country ETPs were the main beneficiaries of the turn in sentiment with China-focused ETPs drawing significant inflows.

In another sign of US investors seeking to diversify their portfolios internationally, US equity ETPs recorded their first outflows (-$2.2bn) since August 2019, driven by selling out of US-listed products.

In contrast, European investors remained bullish on their region’s prospects with buying in EMEA-listed European equity ETPs making up 90% of the segment’s $2.9bn net inflows globally. These inflows came amid concrete progress on the European Recovery Fund and were tilted towards large-cap and broad market exposures.

Commodity ETPs attracted a bumper $9.4bn net inflows during July, dominated by record-breaking demand for gold ETPs which gathered $9.3bn and just surpassed the previous high-water mark of $9.2bn set in April. Inflows were split across listing regions indicating global demand, albeit led by US-listed products.

Silver ETPs were also in focus, notching their own record inflow month at $1.5bn. Flows into silver ETPs now total $4.8bn in 2020 which is more than the segment’s total net inflows from 2013 to 2019, although it is worth bearing in mind that the universe of silver ETPs has risen significantly over the years.

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