More money invested in European equity ETFs by Americans is one of the components of record flows for the exchange-traded product industry lately, BlackRock said.
Global exchange-traded products, which include ETFs, saw record monthly inflows in March, record quarterly flows and a record year-to-date pace, according to the ‘BlackRock ETP Landscape’ report.
There have been $30.9 billion (€28.9 billion) of inflows into European ETPs year-to-date – more than double the $13.3 billion average flow figure seen by this stage of the year since 2010.
Patrick Mattar, from BlackRock’s iShares ETF business, said there were “five key stories” behind European ETP flows last month.
· Equity dominance continues
“For the sixth month in a row, flows into European-domiciled equities funds (+$7.1 billion) surpassed fixed income (+$2.7 billion). This is the fifth largest ever month of inflows into equities. To put this into context, the previous six months is the largest ever six month period of accumulation for equity ETFs domiciled in Europe.”
· Fixed income flows driven by emerging market (EM) debt
“EM debt inflows totalled $1.3 billion in March, achieving the highest level of inflows of any category in fixed income. Both local and hard currency funds have generated significant inflows this year, against the backdrop of President Trump’s protectionist rhetoric. The attractive and relatively high quality yield have been key drivers of flows.”
· US investors follow Europeans into Europe
“As geopolitical risks reduce and equity fundamentals improve, investors continue to move into European equities at pace. Both European-and US-domiciled funds have gathered assets every week since early February 2017. December 2015 and January 2017 combined, $39 billion was withdrawn from US-domiciled European equity funds, a reduction in the total asset base of 45%.”
· The EM-pire strikes back
“Following the US election EM equity and fixed income ETFs saw large outflows driven by President Trump’s protectionist policies. This year that situation has reversed, with flows intensifying over March. The positivity towards EM is about more than just fixed income. Despite remaining $80 million behind their pre-election assets under management, European-domiciled EM equity ETPs have rebounded. This suggests that investors have focused more on the pull back in US dollar and the reduction in US treasury yields, rather than the recent rate hike.”
· Rivers of gold
“Following the US election, investors were selling their holdings in gold ETPs. This year, views have seemingly diverged by domicile. European investors have consistently added to gold ETPs, with only two weeks this year in which there have been outflows and close to $1 billion of inflows over March. Flows into gold funds domiciled out of Europe have been much less consistent, with some large outflows at the start of the month. This dynamic suggests European investors are currently more focused on portfolio diversification than those elsewhere.”
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