ETP FLOWS
January 2019 ETP Flows Commentary
$10B flowed into EMEA-listed ETPs with fixed income
has kicked off 2019 with a bang
Karim Chedid
Karim Chedid, CAIA
Investment Strategist

Key themes this month

1. Income fix: Fixed income leads inflows
2. Held in high esteEM: Largest ever monthly inflow into emerging market (EM) equity ETPs
3. A golden start: Gold ETPs in favour

Capital at risk. All financial investments involve an element of risk. Therefore, the value of the investment and the income from it will vary and the initial investment amount cannot be guaranteed. Unless otherwise stated all data is sourced from the BlackRock Global ETP Landscape at 31 January 2019.

Income fix
1. Income fix

  • Emerging markets were the talk of the town in January, as the exposure led fixed income inflows. Investors allocated $2.7B to emerging market debt (EMD) ETPs, the largest ever monthly inflow into the exposure. Investor interest in EMD was mixed in 2018, with net inflows for the year totalling $2.7B – which has already been equalled in 2019.
  • Rates (government bond ETPs) continued their popularity into 2019 with $2.5B of inflows in January, albeit down from a bumper $3.9B in December. Inflows within rates ETPs were fairly evenly split between intermediate and short term focused ETPs, while long term focused ETP inflows were flat across the month.
  • Investment grade ETPs reversed December outflows of $0.5B with inflows of $0.8B in January – the largest monthly inflow since December 2017. High yield also started 2019 in positive territory with $0.4B of inflows in January, off the back of $0.9B of outflows across 2018.

A tremendous start to the year

Monthly flows into EMEA-listed EMD and rates ETPs,
January 2018-January 2019

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EM
2. Held in high esteEM

  • EM equity ETPs gathered $3B in January, the largest ever monthly inflow. This consolidated December’s $2.3B inflows, as a stalling dollar coupled with a more dovish Fed drove investors back to the exposure with conviction.
  • Quarterly inflows into EM equity ETPs are on track to be the largest since Q1 2018, when $4.8B was added in the first three months of the year. Investor interest in EM ebbed and flowed last year as a combination of tighter financial conditions and a stronger dollar hampered interest in the middle of the year. Inflows began to return in September, but with little conviction; December appears to have been the turning point.
  • Investors have now sold US equity ETPs for two consecutive months, the first time this has happened since June 2015. $2.0B flowed out of US equities in January, a little less than the $2.3B that was lost in December when market volatility picked up. So far this year, investors appear to be turning to EM for risk exposures, as European equities have continued to be sold (-$1.5B in January).

Upward trajectory

Cumulative flows into EMEA listed EM equity ETPs,
January 2018-January 2019


3. A golden start

  • Gold continued to gather assets in January (+$0.9B), following on from a strong end to the year with $1.6B added in December. This, combined with inflows into EM and EMD, indicates a barbell approach from investors, as money has been going to both safe haven and risk exposures. Gold has now had inflows for four consecutive months; the first nine months of 2018 were more erratic, as investors lacked conviction on the precious metal, in part due to the stronger dollar.

 


Related research: The case for gold and gold producers


 

  • More broadly, commodity ETPs added $0.7B overall in January, and the positive start to the year is on course to reverse two consecutive quarters of outflows, which totalled -$3.7B.
  • Investors ran hot and cold on commodities in 2018; a flat Q1 was followed by over $3B in inflows into EMEA-listed commodity ETPs in Q2, and a subsequent negative turn in the second half of the year. Gold flows decoupled from broader commodities in Q4, with strong inflows.

Golden rule

Cumulative flows into EMEA listed gold ETPs,
January 2018-January 2019

Past flows into EMEA-listed ETPs are not a guide to current or future flows and should not be the sole factor of consideration when selecting a product. This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation to, offer or solicitation to buy or sell any financial instrument or product or to adopt any investment strategy. Investment in the products mentioned in this document may not be suitable for all investors. BlackRock has not considered the suitability of any product against your individual needs and risk tolerance.

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