ETP FLOWS
March 2018 ETP Flows Commentary
Monthly net flow into EMEA-listed ETPs stutters but stays positive at $1.2B ($USD)
Karim Chedid
Karim Chedid, CAIA
Investment Strategist
April 2018

Key themes this month

1. Muted March: monthly inflows at lowest level since Feb 2016
2. A right GEM: record quarter for EM equity
3. Bad grade: investment grade has record monthly outflows

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 state all data is sourced from the BlackRock Global ETP Landscape at 31 March 2018. This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any financial instrument or product or to adopt any investment strategy.

dates with destiny
1. Muted March

  • EMEA-listed ETPs added $1.2B in March, despite the largest outflow week since December 2014, when $2.0B of assets were sold between 26-30 March. Investors’ preference for equities has continued into 2018 – the last time that fixed income flows exceeded equity flows was in June 2017.
  • Market sentiment was jittery in March, with market volatility fuelled by trade and tech-related headlines. Flows into EMEA-listed ETPs were softer than record January levels (see Stunted spring growth) as investors may have been sitting on cash or making opposite allocations that netted off.
  • While March’s net inflows are the lowest monthly numbers since November 2016, certain areas remained popular. The majority of equity inflows went to the US (+$6B), potentially influenced by the fiscal easing announced earlier in the year. European equities’ popularity reversed in the middle of the month, as sentiment was likely dented by a slowdown in macro momentum and growing political uncertainty in Italy.

scales
2. A right GEM

  • EM equity registered its largest quarter of inflows ever, with +$4.6B added. This also set a record fifth straight quarter of inflows. A slowdown of buying in EM equities towards the end of Q1 did not hamper the record run, despite concerns over an increase in global trade risks.
  • Consistent flows into the region may be as a result of strengthening growth prospects, alongside a well-managed China slowdown and structural reform momentum coming from countries such as India.
  • EMD did not fare as well. March brought about the first month of outflows in 2018 (-$0.5B), as positive sentiment retreated following the $1.4B that was added in the first two months of the year. A record January for global ETP flows may have elevated EMD inflows, which slowed down towards the end of Q4 as investors may have been concerned about stretched valuations. This leaves net inflows for the year at $0.9B.

Bank
3. Bad grade

  • March marked the first month of negative fixed income flows since the US election in November 2016, with net outflows totalling $454m.
  • Investment grade was hit particularly hard, losing $1.5B of assets over the month – the largest monthly outflow from investment grade since records began. Investors may have been concerned about limited upside in credit due to stretched valuations.
  • Government bond exposures gathered over $2B for the second month running. January and February mark the second and third largest monthly flows into rates ETPs respectively. The majority of inflows went into short and intermediate term ETPs (+$1.5B) as investors appeared to take advantage of cheapened valuations.

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.