ETPs listed globally gathered $64.8 billion in net new assets during March, according to the latest ETP Landscape Report from investment giant BlackRock, setting a new range of performance yardsticks, having surpassed existing monthly, quarterly and year-to-date (YTD) records.
ETPs listed globally gathered $64.8bn in net new assets during March 2017, according to BlackRock.
The strong net inflows during March lifted the industry’s annualised organic growth rate for 2017 to 22%, significantly higher than the 13% recorded for the full-year 2016. Quarterly flows amounted to $189.1bn, exceeding the previous quarterly flow record of $137.8bn from Q4 2014 by an impressive 37.2%.
US equity ETPs led flows globally during the month with $26.7bn despite renewed policy uncertainty, fuelled by large caps with $18.5bn net inflows. A weaker dollar lifted flows for emerging market (EM) ETPs, including broad EM equity with $5.5bn and EM debt with $2.1bn. Fixed income flows remained resilient at $12.4bn, despite a widely anticipated Fed rate hike this month – with strength in investment grade corporates with $4.5bn.
Europe-listed ETPs gathered $30.9bn YTD; more than double the $13.3bn average flow figure seen by this stage since 2010. The report highlights five key themes developing within the European ETP industry.
Equity dominance continues
For the sixth month in a row, flows into European-domiciled equity ETPs (+$7.1bn) surpassed fixed income (+$2.7bn), also marking the fifth largest ever month of inflows into equities.
Over the previous 12 months there have been $38.5bn of net inflows into equity ETPs while fixed income ETPs took $24.2bn.
The report also notes that the previous six months has been the largest ever six month period of accumulation for equity ETPs domiciled in Europe.
Fixed income flows driven by emerging markets debt
EM debt ETP inflows totalled $1.3bn in March, achieving the highest level of inflows of any category in fixed income.
Patrick Mattar, from the iShares EMEA capital markets team at BlackRock, commented: “Both local and hard currency funds have generated significant inflows this year, against the backdrop of President Trump’s protectionist rhetoric. The attractive and relatively high quality yield have been key drivers of flows.”
US investors follow Europeans into Europe
While $39bn was withdrawn from US-domiciled European equity ETPs between December 2015 and January 2017, representing a reduction in the total asset base of 45%, US investors have become increasingly bullish about the prospects of European stocks since then.
“As geopolitical risks reduce and equity fundamentals improve, investors continue to move into European equities at pace,” said Mattar. “Both European-and US-domiciled ETPs have gathered assets every week since early February 2017.”
Looking at the past five years, there is now just $140m between the cumulative flows into European-and US-domiciled European equity ETPs.
Interest in EM has revived
Mattar notes: “Following the US election EM equity and fixed income ETPs saw large outflows driven by President Trump’s protectionist policies. This year that situation has reversed, with flows intensifying over March. The positivity towards EM is about more than just fixed income. Despite remaining $80m behind their pre-election AuM, European-domiciled EM equity ETPs have rebounded. This suggest that investors have focused more on the pull back in US dollar and the reduction in US Treasury yields, rather than the recent rate hike.
Gold demand diverges by location
Following the US election, all investors were selling their holdings in gold ETPs. This year, views have seemingly diverged by domicile. European investors have consistently added to gold ETPs, with only two weeks this year in which there have been outflows and close to $1bn of inflows over March. Flows into gold funds domiciled out of Europe have been much less consistent, with some large outflows at the start of the month.
“This dynamic suggests European investors are currently more focused on portfolio diversification than those elsewhere,” said Mattar.