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@BlackRock: Global #ETP Flows in April – the cyclical tilt persists

Check out the latest update from iShares by BlackRock on global Exchange Traded Product (ETP) flows during April 2021. 

After two record-breaking months, global Exchange-Traded Product flows fell to $102.6B in April (vs. $136.4B in March). The decline was driven by a large fall in equity flows, from $120B in March to $62.4B in April. Flows into fixed income ETPs rose to $36.1B – the highest level since July 2020 – while commodity outflows moderated to -$0.6B in April vs. -$6.3B in March.

Key themes in April:

Time to return to European equities?

  • US equity buying continued to dominate global equity flows, despite falling from $75.7B in March to $36.4B in April –the lowest level in three months. Elsewhere, flows into emerging market (EM) equity ETPs dropped into negative territory (-$1.7B) for the first time since August 2020, largely as a result of outflows from single country exposures including South Korea and Brazil.
  • Flows into European equities, on the other hand, rose to $3.8B –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% 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 ($3.2B), with net flows into single country exposures falling to $0.6B, down from $1.2B 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.

Flows in credit

  • In fixed income, credit flows picked up in April, with $6.2B of inflows into investment grade (IG) ETPs and $3B 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.
  • Emerging market debt (EMD) flows rebounded to $2.8B in April –the largest monthly inflows since November –with buying spread broadly across listing regions.
  • Rates flows remained fairly steady, with $4.7B added in April, compared to $5.2B in March. At a regional level, flows into EMEA-listed rates picked up for the first time in six months, with $1.1B of inflows –the highest amount since October ($1.6B). Despite this, year-to-date EMEA-listed rates flows remain negative at -$1.1B, compared to $7.1B into US-listed counterparts.

Cyclical tilt persists

  • Global inflows into sector ETPs dropped 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. Inflows into technology ETPs increased slightly to $1.8B (from $1.6B in March), which, alongside a drop in flows into other sectors, meant that tech accounted for a higher proportion of overall sector flows (16%) compared to the previous month (9%). This still fell short of the strong demand we saw earlier in the year though, with tech accounting for 43% of sector flows in February.
  • Within the muted overall sector flows, the cyclical tilt persisted, with significant inflows into financials ($4B), materials ($1.6B) and energy ($2B). However, flows into industrials ETPs moderated to $0.6B –the lowest level since October 2020. Delving a little deeper, buying in eurozone financials ETPs totalled $0.6B, 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 $21.2B of the $26.7B allocated to the sector this year.

Sustainable flow trajectory sustained

  • Last year’s incredible growth in sustainable ETFs continued apace through the first third of 2021. April saw $10.8B of inflows across US and EMEA-listed sustainable ETPs –almost double the total from April 2020 ($5.7B). ESG best-in-class equivalents led, with $4.4B added across US, World and Europe exposures. Climate-focused ETPs followed, with $2.3B of inflows, almost entirely attributable to two newly-launched US-listed products (which gained $1.9B). ESG-optimised strategies were the next most popular, attracting $1.3B 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% ($40B) 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 $238B, up from $72B a year ago.

 

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