Global ETP flows down overall in April, with fixed income and European equities rising
Global ETP flows finally dropped in April, after two record-breaking months, says BlackRock, with numbers down from USD136.4 billion in March to USD102.6 billion in April.
The firm writes that the decline was driven by a large fall in equity flows, from USD120 billion in March to USD62.4 billion in April. However, flows into fixed income ETPs rose to USD36.1 billion, the highest level since July 2020, and commodity outflows recovered a little, from USD6.3 billion in March, to USD0.6 billion in April.
US equity buying continued to dominate global equity flows, despite falling from USD75.7 billion in March to USD36.4 billion in April –the lowest level in three months. Elsewhere, flows into emerging market (EM) equity ETPs dropped into negative territory (-USD1.7 billion) for the first time since August 2020, largely as a result of outflows from single country exposures including South Korea and Brazil.
However, flows into European equities rose to USD3.8 billion –the highest level since July 2020. There are signs that demand is broadening out, with international investors starting to warm to European equities: inflows into US-listed products accounted for 86 per cent of the total European equity inflows in April, outpacing EMEA-listed flows for the first time since August 2020.
In line with European equity buying in the previous month, inflows in April heavily favoured regional exposures (USD3.2 billion), with net flows into single country exposures falling to USD0.6 billion, down from USD1.2 billion in March. This highlights a continuation of the gradual shift we have seen so far this year, from European single countries to more regional exposures.
In fixed income, credit flows picked up in April, BlackRock writes, with USD6.2 billion of inflows into investment grade (IG) ETPs and USD3 billion into high yield (HY). These represent the highest levels since August and November 2020, respectively, and come after a lack of conviction towards credit in recent months, the firm says.
Emerging market debt (EMD) flows rebounded to USD2.8 billion in April –the largest monthly inflows since November –with buying spread broadly across listing regions.
Rates flows remained fairly steady, with USD4.7 billion added in April, compared to USD5.2 billion in March. At a regional level, flows into EMEA-listed rates picked up for the first time in six months, with USD1.1 billion of inflows –the highest amount since October (USD1.6 billion). Despite this, year-to-date EMEA-listed rates flows remain negative at -USD1.1 billion, compared to USD7.1 billion into US-listed counterparts.
BlackRock writes that a cyclical tilt persists in the flows story, with global inflows into sector ETPs dropping overall in April, coinciding with the Q1 earnings reporting season kicking off.
“Beneath the surface, sector flow trends remained relatively in line with what we have been seeing so far this year,” the firm says. “Inflows into technology ETPs increased slightly to USD1.8 billion (from USD1.6 billion in March), which, alongside a drop in flows into other sectors, meant that tech accounted for a higher proportion of overall sector flows (16 per cent) compared to the previous month (9 per cent). This still fell short of the strong demand we saw earlier in the year though, with tech accounting for 43 per cent of sector flows in February.”
Within the muted overall sector flows, the cyclical tilt persisted, BlackRock writes, with significant inflows into financials (USD4 billion), materials (USD1.6 billion) and energy (USD2 billion). However, flows into industrials ETPs moderated to USD0.6 billion –the lowest level since October 2020. Delving a little deeper, buying in eurozone financials ETPs totalled USD0.6 billion, marking the second-largest inflows into the exposure on record. Despite this pickup, year-to-date flows into eurozone financials ETPs remain leagues behind the inflows into US financials, which account for USD21.2 billion of the USD26.7 billion allocated to the sector this year.
Sustainable ETFs continue to dominate, the firm writes. “Last year’s incredible growth in sustainable ETFs continued apace through the first third of 2021. April saw USD10.8 billion of inflows across US and EMEA-listed sustainable ETPs –almost double the total from April 2020 (USD5.7 billion). ESG best-in-class equivalents led, with USD4.4 billion added across US, World and Europe exposures. Climate-focused ETPs followed, with USD2.3 billion of inflows, almost entirely attributable to two newly-launched US-listed products (which gained USD1.9B). ESG-optimised strategies were the next most popular, attracting USD1.3 billion of inflows in April, predominantly driven by US-listed ETPs.
“The transition from standard to sustainable exposures has continued to build momentum, especially in Europe, where 51 per cent (USD40 billion) of all ETP flows so far this year have been into sustainable equivalents. The continued upwards trajectory of sustainable flows has brought the total AUM across US and EMEA-listed sustainable ETPs to USD238 billion, up from USD72 billion a year ago.”