BlackRock: ETP Flows in October – record month for inflation-linked bond ETP flows

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Blackrock has reported today that global ETP buying rebounded in October to the highest level since June, with $113.0B of inflows, up from $86.7B in September. The increase was driven primarily by a pickup in equity buying, which reached $85.8B in October, up from $62.6B in September. Inflows into US equity ETPs more than doubled from $28.3B to $59.8B. Fixed income flows fell to $21.5B, despite a record month of inflows for inflation-linked bond ETPs. Interest in commodity ETPs remained lacklustre, with $0.5B of outflows in October.

Key themes in October:

Land of the rising flows

  • Inflows into US equity ETPs hit $59.8B in October – more than double September’s $28.3B – and helped to drive an overall pickup in equity flows. US equity buying rose across US and EMEA-listed ETPs, with US listed flows at the highest level since June, and EMEA-listed buying at the highest level since March.
  • Japanese equity flows remained consistent in the run up to the election: $3.3B was added globally in October vs. $3.4B in September, continuing an inflow streak that has almost erased the $17.5B of outflows from January 2018-May 2020. Buying in EMEA-listed Japanese equity ETPs drove 31% of the global inflows in October – up from 18% in September – while US listed flows turned negative (-$0.8B), reversing the $0.9B of inflows in the previous month.
  • Flows into EMEA-listed Japanese equity ETPs have reached $6.3B so far this year – on track to set a new annual record – while flows into US-listed ETPs are set to end the year in positive territory for the first time since 2013, with $0.5B added so far.

Inflating expectations

  • October was a record month for inflation-linked bond ETP flows amid rising inflation concerns, with $6.5B added. This was nearly double September’s $3.5B and takes global flows to $39.9B YTD – more than double the $17.3B added in 2020. October’s flows were primarily driven by buying in US-listed ETPs ($5.9B), although inflows into EMEA-listed products also rose 5.5x month-on-month to $0.5B.
  • The majority of inflation-linked flows went into products focused on the US, continuing the trend seen over the past couple of years. Buying in eurozone inflation linkers also increased to $0.4B – the third highest on record, and up from $0.1B in September.
  • Elsewhere in fixed income, high yield (HY) and investment grade (IG) flows moved in opposite directions for the first time since July, with $0.7B out of IG and $1.8B into HY. Buying in rates also rose to the highest level since June, with $5.6B of inflows, primarily into US Treasury exposures.

Equity ballast

  • Global flows into minimum volatility (min vol) ETPs turned positive in October for the first time since February 2020, with $0.5B added. Simultaneously, quality ETP flows returned to positive territory ($0.8B) after outflows in September (-$0.6B), while value flows were marginally negative in the exposure’s third outflow month of the year.
  • Delving deeper, flows into min vol ETPs were driven by buying of US-listed US-focused exposures, while EMEA-listed products notched up $0.2B of outflows – cancelling out the $0.2B of inflows across the previous two months.
  • At a sector level, flows once again pointed to a barbell approach, with tech ($5.5B) and financials ($4.6B) leading the way. Investors continued to sell more manufacturing-tilted cyclical sectors, such as industrials (-$1.2B) and materials (-$0.3B), in a continuation of trends that have persisted across the second half of the year.

Sustainable flows accelerate

  • Sustainable flows picked up momentum in October, with $10.0B of net inflows across US and EMEA-listed ETPs – surpassing the previous two months and coming in as the sixth largest month of 2021. EMEA-listed ETPs gathered $7.0B – more than double the amount added to US-listed counterparts ($3B).
  • EMEA flows were led by best-in-class equity strategies ($3.6B), which in turn were driven by strong inflows into global ($1.7B) and US exposures ($0.7B). ESG themes saw $1.3B of inflows, while ESG optimised/tilt strategies gathered $1.1B. Within ESG themes, flows into clean energy ETPs bounced back from -$38m in September to $0.2B in October. Flows into climate exclusive strategies rose sharply from $0.3B in September to $1.0B in October, largely driven by buying of Climate Transition Benchmark (CTB)/Low Carbon Transition strategies.
  • Breaking down US-listed sustainable flows, ESG optimised exposures gathered the most assets in October ($0.7B), albeit less than the previous month ($1.0B). Environment-based strategies saw a significant increase, bringing in $0.6B; while this represents a significant uptick from the average over the previous six months ($0.2B), the rise was solely due to a $0.5B inflow into an individual solar strategy. Screened strategies also saw an increase in flows, with $0.6B added in October, up from $0.4B in September.


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