Large flows recorded into BlackRock’s US sector ETFs

Oct 18th, 2017 | By | Category: Equities

Significant inflows into three of BlackRock’s European-listed iShares US sector ETFs, those providing exposure to equities in the financials, information technology, and healthcare sectors, have been recorded over the last month.

Large flows into BlackRock’s US sector ETFs

BlackRock’s US financials ETF has performed particularly strongly in the past year, gaining 36.8%.

The iShares S&P Information Technology Sector UCITS ETF has gained $173 million in net new assets in the month to 17 October 2017, helping to swell total assets under management (AUM) by 96% from $192m to $378m. The ETF has returned 33.5% in the past 12 months, compared to the 22.2% returned by the S&P 500 Index.

The iShares S&P Financials Sector UCITS ETF has recorded inflows of $463m in the last month, helping to grow total AUM by 71% from $710m to $1.2 billion. The ETF has returned 36.8% in the 12 months to 17 October.

The iShares S&P Health Care Sector UCITS ETF has seen total AUM grow by 141% from $188m to $459m on the back of inflows of $265m during the last month. The fund has returned 20.3% in the past 12 months.

Financials and information technology are cyclical sectors, along with industrials, consumer discretionary and materials. Cyclical sectors tend to outperform when the economic cycle is in an expansionary phase and underperform during periods of economic slowdown. The reverse is true of defensive sectors, which include healthcare, consumer staples, energy, telecommunications and utilities.

This is borne out by the outperformance of financials and information technology and the underperformance of healthcare relative to the S&P 500 over the past year, a period of economic expansion.

Financials have been performing well in the past year on the back of rising interest rates, and increased optimism for industry deregulation following Trump’s election as US President. Stocks in the sector typically see earnings rise along with the Federal Reserve base rate.

Information technology stocks have been in the news recently for their impressive performance, with the FANG (Facebook, Amazon, Netflix and Google) stocks in particular recording eye-catching returns.

The ETFs are listed on the London Stock Exchange, Xetra and SIX Swiss Exchange. All of the ETFs have total expense ratios (TERs) of 0.15%.

Flows into the iShares European sector ETFs have been much more modest during the past month.

The iShares STOXX Europe 600 Technology UCITS ETF (Xetra: EXV3) has gained €17m euros during the month as AUM has risen by 18% from €94m to €110m, while the iShares STOXX Europe Banks UCITS ETF (Xetra: EXV1) has seen inflows of $92m in the last month, helping to increase total AUM from €819m to €917m, a rise of 12.0%. The iShares STOXX 600 Health Care UCITS ETF (Xetra: EXV4) has gained only €1.9m in flows over the past month, as AUM has risen by 1.8% from €601m to €612m.

ETFs within BlackRock’s European sector suite each has a TER of 0.46%.

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