Investors favoured “risk-on” ETFs during October, according to BlackRock

Nov 6th, 2015 | By | Category: Alternatives / Multi-Asset

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BlackRock, the asset manager behind the iShares range of exchange-traded funds, has released its latest ETP Landscape report detailing global ETF flows during October. The report highlights robust growth in new assets worldwide, keeping the industry on track to beat previous records of net new gatherings. The report also shows a preference for “risk-on” assets during the month, indicating that a reprieve in global volatility levels has spurred investors to shift into these assets.

Investors favoured riskier ETFs during October, according to BlackRock

Ursula Marchioni, Chief Strategist EMEA, iShares.

The report notes that $36.2bn in net inflows were recorded globally during October, bringing the total of net new assets formed to $271bn year-to-date (YTD as of 31 October 2015). The previous year-to-date record was set in 2014 at $239bn, indicating that the growth of the ETF industry is still gaining momentum.

Upon closer analysis of global ETF flows in October, a pattern of increased risk tolerance begins to emerge. Ursula Marchioni, Chief Strategist EMEA, iShares commented: “October flows into global ETFs were driven by the Fed’s decision to hold rates in September, triggering a risk-on environment in global markets. This dovish stance at the September FOMC and missed U.S. non-farm payroll numbers on October 2, meant that bad news became good news for markets once again.”

ETFs tracking US equities reported the highest net inflows during October at $10.3bn. Regarding fixed income ETFs, high yield corporate debt ETFs outpaced those covering investment grade corporate debt, with the two sectors bringing in $6.1bn and $4.4bn respectively. Total net inflows in the global fixed income ETF space amounted to $14.7bn during October ($88bn YTD), helping global AUM rise above $500bn for the first time in the history of the industry.

European-domiciled ETFs attracted $7.3bn in new assets during the month, bringing the continent’s YTD total net inflows to $69bn, well past the full year record set in 2014 of $62bn. Total assets under management (AUM) for the region now amount to $516.3bn.

European investors put a net total of $3.7bn into fixed income ETFs during October. Once again there was a considerable demand for risk-on assets. “European ETFs saw strong demand for risk-on fixed income credit exposures (investment grade and high yield exposures, attracting $1.1bn and $832mn respectively). This was a result of ECB-driven trickle down yield demand and, unlike the global trend, did not happen at the expense of government bond exposures, which saw strong demand as well (+$1.1bn),” said Marchioni.

Although the asset type most in demand within Europe was fixed-income ETFs, equity-based funds also saw notable inflows of $3.3bn. Within these products, broad emerging market ETFs were most popular, pulling in $1.1bn in new assets; European equity exposure ETFs came second, amassing $623m, while those funds offering US equity exposure were out of favour with European investors, exhibiting modest outflows of $283m.

Investors once again became bullish on ETFs tracking emerging markets, led by Chinese central bank rate cuts and other policy moves. Total net flows into these funds amounted to $4.6bn, ending a four month streak of outflows. “October also saw emerging market equity exposures back in favour with the longest streak of weekly inflows all year (4 consecutive weeks), supported by a stabilisation in Chinese data, albeit at low levels,” said Marchioni.

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