ETP flows drop for second consecutive month, says BlackRock
Flows into global Exchange Traded Products (ETPs) dropped for a second consecutive month, with USD95.6 billion added in May, down from USD105.4 billion in April and a record USD136.3 billion in March, according to the latest Global ETP Flows report from BlackRock.
Equity flows were steady month-on-month, with USD64.4 billion added, compared to USD62.4 billion in April. Fixed income buying dropped to USD23.3 billion, vs USD36.1 billion in April – negating the pickup in commodity flows, which turned positive (USD6.5 billion) for the first time since January.
While equity flows held steady at the headline level, regional allocations differed in comparison to April. European equity inflows of USD8.7B – the largest inflow month for the exposure since May 2017 – showed continuing international interest, with flows into US-listed European equity ETPs (USD5.8 billion) once again outpacing EMEA-listed flows (USD2.9 billion).
Emerging market (EM) equity flows also recovered from outflows of -USD1.7 billion in April to post USD6.4 billion of inflows, with flows into EM single exposure ETPs outpacing broad EM for the first time since September 2020. Inflows into single EM ETPs continued to favour Asia, with South Korea and China leading the way in May.
At the same time, buying in US equity ETPs hit the lowest level in four months, with USD28 billion added, vs USD36.4 billion in April, while Japanese equity inflows picked up to USD5.1B, the highest level since January amid continued buying by the Bank of Japan.
Inflation-linked ETPs registered a record USD4.4 billion of inflows in May, surpassing the previous record of USD4.3 billion set in June 2020. May’s inflows also take YTD flows into inflation linkers past the annual record of USD17.3 billion set in 2020, with the activity-led restart driving investor interest in building inflation protection into portfolios.
US-focused inflation linkers have inevitably accounted for the majority of flows, given the larger fund universe and that US inflation has been in focus across global markets, but eurozone and global products have also consistently gathered inflows this year. Eurozone inflation-linked ETPs have added USD1 billion YTD – just behind the record USD1.2 billion added in 2015 – while global linker flows have reached USD1B YTD – just short of 2020’s record USD1.1 billion.
Elsewhere in fixed income, trends were broadly in line with April flows, with buying in rates, multi-sector and EM debt ETPs. Credit ETP flows – which started to recover in April, with USD6.3 billion added to investment grade (IG) and USD3B to high yield (HY) – fell back in May, with USD1 billion added to IG and USD1.3 billion to HY.
Commodity flows returned to positive territory in May for the first time in four months, driven by record flows into broad commodity ETPs – USD3.3 billion, up from USD1.3 billion in April – and the first inflow month for gold since January (USD3.3 billion). The record monthly flows into broad commodity exposures were predominantly into US-listed ETPs (USD3.2 billion), with EMEA-listed ETPs gathering USD0.3 billion, on par with EMEA-listed flows in April.
Gold flows were more evenly split, with USD2.1 billion added to US-listed ETPs and USD1.4B into their EMEA-listed counterparts. Flows into EMEA-listed gold ETPs built upon the USD0.4 billion added in April.
Flows into silver also returned to positive territory for the first time since January, with USD0.4 billion added in May.
May saw a slight tempering of the flow momentum that sustainable ETPs have enjoyed for the past nine months. Monthly sustainable flows for US and EMEA-listed sustainable ETPs came in at USD5.5 billion across asset classes, making May their quietest month since August 2020, and down from the February 2021 monthly record of USD18 billion.
In Europe, ESG best-in-class funds brought in just under half of Europe’s USD3.7 billion monthly total, led by World and US equity exposures. ESG-optimised equity strategies came within touching distance of USD1B for their second-best month on record, with USD966 million of inflows driven by US and European exposures.