September 2018 ETP Flows Commentary
Flows increased to $6.1B in September, the largest monthly inflow since February. Equities added $5.9B, while fixed income gathered $1.6B, and commodities lost assets.
Karim Chedid
Karim Chedid, CAIA
Investment Strategist
October 2018

Key themes this month

1. Not worth the value: Largest ever monthly outflow from value ETPs
2. What goes around comes around: Defensives continue to be in favour
3. On a high: High yield registers biggest monthly inflow since Jan 17

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 30 September 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.

1. Not worth the value

  • Last month marked the largest outflow month ever for value ETPs (a number skewed by the increasing factor ETP universe), with $0.8B out – a trend across global ETPs. This is now the fourth consecutive month of outflows for the factor, which amounts to $1.7B of assets lost over this period.
  • Momentum, on the other hand, continued to gather assets, adding $0.7B in its largest inflow month of 2018. Investors have continued to back momentum globally in 2018 as the economic conditions are ripe for the factor to outperform, while value – which traditionally underperforms later on in the business cycle – has fallen out of favour following strong buying in January and February.
  • A special mention goes to minimum volatility ETPs, which added $0.6B in September, the largest monthly inflow since July 2016.

Go low (vol)

Monthly flows into selected EMEA listed smart beta ETPs,
January-September 2018

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2. What goes around comes around

  • Investors turned on both the financials (-$110m) and tech (-$102m) sector in particular over the course of September. Flows into financials have lacked conviction this year with large inflows in January and February – in line with broad equity flows – and large outflows in May and June, which leaves the YTD total at -$407m.
  • Tech flows stand at $707m YTD, as September was the first outflow month for the sector in 2018. Outflows last month were predominantly from funds tracking the US tech sector, and could be a result of rebalancing activity.
  • Within the US, defensive sectors have increased in popularity since June, with YTD flows standing at $1.3B. EMEA investors appear to have less conviction on cyclical sectors than US counterparts, where cyclical flows still outstrip defensives by approximately $2.5B.

Going defensive

Cumulative flows into EMEA listed US sector ETPs,
split by cyclicals and defensives, January-September 2018

3. On a high

  • In fixed income, high yield registered its largest monthly inflow since January 2017 with $0.7B in. Money predominantly went into euro denominated high yield, which accounted for 70% of the inflows, while dollar denominated debt gathered $0.2B.
  • Investors are still net negative on the exposure – inflows have been in negative territory since January – with YTD flows standing at -$1.1B.
  • Investment grade flows continued their upwards trajectory with $0.2B added in September, the fifth consecutive month of inflows for the exposure. YTD flows for IG are still negative at -$1B due to heavy selling from February to April. Since flows bottomed out in May, investors have added just over $1B.

Bouncing back

Cumulative flows into EMEA listed IG and HY ETPs,
January-September 2018

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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