OCTOBER 2019 ETP FLOW TRENDS


Natasha Sarkaria 01/Nov/2019

Key themes this month:

1. The Europe comeback?: A second consecutive month of European equity inflows
2. Quality fixed income: Investment grade (IG) and rates inflows continue
3. Value in vogue: October was the biggest inflow month of the year for the value factor

Insights from iShares by BlackRock, the world’s leading Exchange Traded Fund (ETF) provider.* About iShares > Unless otherwise stated all data is sourced from BlackRock as at 16 June 2020. All amounts given in USD.

*World’s leading ETF provider: Based on over 900+ ETPs and more than USD $2 trillion in AUM globally, BlackRock Global Business Intelligence as at 30 June 2019. Trusted to manage more money than any other investment firm: Based on USD $6.84 trillion in AUM globally, BlackRock as of 30 June 2019.

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. The investor may not get back the amount originally invested.

Unless otherwise stated all data is sourced from the BlackRock Global ETP Landscape at 31 October 2019. All amounts given in USD.

1. The Europe comeback?

  • European equites gained their largest inflow month this year with $4.4B added in October. This marked the first time the exposure has received positive inflows in consecutive months since October 2018; investors have bought $7.9B of European equities since September. Despite the improvement in sentiment towards European equities, net flows this year still remain negative at -$4B.
  • Investors tempered their buying of US equities to only $0.2B in October after September’s record inflows (+$5.3B). Despite lagging European equity inflows in October, year-to-date flows into US equities are significantly higher, at $10B YTD.
  • Investors have continued to sell emerging market (EM) equities for a third consecutive month, with $0.3B of outflows in October. These outflows come despite an apparent de-escalation in global trade tensions, but the October figure does mark a slight improvement from September (-$1B).

Two in a row

Monthly flows into EMEA-listed European equity ETPs, January 2019-
October 2019

Cumulative flows into EMEA-listed equity ETPs, January-August 2019

Source: BlackRock Global ETP Landscape (a BlackRock tool that sources data from BlackRock and Markit) at 31 October 2019.

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VISIT VISIT

2. Quality fixed income

  • Investors continued to favour quality in fixed income in October: investment grade (IG) and rates gained the lion’s share of flows, with +$1.2B and +$1.8B respectively, while investors continued to sell high yield (-$0.1B). Rates and IG have not had a negative flow month so far this year – this 10 month streak has been their longest on record.
  • EMEA investors have favoured fixed income exposures throughout the year and YTD net flows stand at $55B. In comparison, equity inflows have totalled $30B YTD.
  • Emerging market debt (EMD) gained another $0.9B in October. Investors favoured local currency ETPs (+$0.8B), while selling hard currency ETPs (-$0.1B). Investors had favoured LC early this year, but sold the exposure heavily in May. More recently, sentiment has begun to revert.

Local currency back in front

Cumulative flows into EMEA-listed hard and local currency EMD ETPs, January 2019-October 2019

Monthly flows into EMEA-listed fixed income ETPs, January-August 2019

Source: BlackRock Global ETP Landscape (a BlackRock tool that sources data from BlackRock and Markit) at 31 October 2019.

3. Value in vogue

  • Value ETPs gained $0.4B in October – the biggest monthly inflow into the exposure this year – sending the factor’s YTD flows back into positive territory. Value only gained inflows of similar magnitude in March 2019, when investors bought $0.3B. Investors sold minimum volatility (min vol) ETPs for a second consecutive month (-$0.2B), although min vol remains the most popular factor this year with net inflows of $3.3B YTD.
  • Commodity flows picked up to $1.6B after dropping to $0.7B in September. The majority of inflows were allocated to gold ($1.2B) amid market volatility. Silver flows were flat for October but recovered from the -$0.1B of outflows in September.

Value reaps inflows

Monthly flows into factor ETPs, January 2019-October 2019

Monthly flows into EMEA-listed commodity ETPs, January 2019-August 2019

Source: BlackRock Global ETP Landscape (a BlackRock tool that sources data from BlackRock and Markit) at 31 October 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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