BlackRock – Global ETP flows: July 2022

by | Aug 8, 2022

  • A late flurry: flows into global ETPs inched higher in July, with $44.2B added, almost half of this coming in the last week of the month.
  • Fixed income dominates: in contrast to June, fixed income accounted for the bulk of inflows ($32.5B), mostly due to a pickup in credit ETP buying.
  • Cooling on commodities: July was the largest outflow month on record for commodity ETPs, with $11.2B of selling.

 

A healthy defensive tilt

A drop in equity flows to $17.0B can be largely attributed to a slowdown in US equity buying to $12.4B, down from $25.9B in June. EM equity flows were flat in July after inflows in June, and European equity outflows stayed steady (-$3.9B).

Sector selectivity continued to point to a defensive tilt in equity allocations. Healthcare – despite leading sector flows for three consecutive months (including $2.6B in July) – is still only the second-most popular sector this year, behind tech ($1.2B in July). The $18.1B added to tech and the $14.6B added to healthcare YTD are in stark contrast to energy, for example, which is now just $0.4B up on the year after peaking at just over $9B in March.

In July, despite a relatively solid earnings season for manufacturing-tilted sectors, energy (-$2.7B), industrials (-$0.7B), and materials (-$1.4B) all registered outflows for a third consecutive month. Financials sector ETPs, which have been sold since March, also lost $3.2B, although this was the lowest outflow month for the sector since March.

Back in credit

Fixed income flows recovered to $32.5B in July, after June’s blip ($3.2B), largely due to a pickup in credit buying ($13.8B). Investment grade (IG) and high yield (HY) recorded $9.9B and $3.9B of inflows, respectively, recouping the 9.9B lost from credit in June and continuing a trend of inconsistent flows this year.

While the majority of IG flows went into US IG ($7.7B), it was the highest inflow month for European-focused IG since April 2020, with $2.2B added. In HY, US-focused ETPs took a larger proportion of flows, with $3.7B of the total $3.9B.

Rates flows were relatively constant MoM ($17.3B) and inflation-linker flows turned negative (-$1.9B). Rates ETPs have been by far the most popular fixed income exposure YTD, with $103.4B of inflows, well ahead of IG in second place ($19.2B).

Record outflows from commodities

The $11.2B of outflows from commodity ETPs in July was not only the largest monthly outflow on record, it also marked a third consecutive month of selling for the first time since Feb-April 2021. The figure also surpasses the combined $9.7B of outflows across May and June 2022.

Alongside an increase in gold outflows (-$1.7B in June to -$4.3B in July), selling of broad commodity ETPs picked up significantly, from -$0.7B in June to -$4.2B in July. This also marked the largest outflow month on record for broad commodity focused ETPs.

Outflows from commodity ETPs were broad-based and split fairly evenly between listing regions, with $6.0B out of US-listed products and $5.5B out of EMEA-listed ETPs.

Sustainable flows soar

Sustainable ETP flows soared in July, with $9.6B added in total, compared to $2.3B in June. EMEA-listed ETPs captured almost all of the buying ($9.2B), with US-listed sustainable flows coming in at just $0.3B. For EMEA-listed ETPs, July accounted for one third of inflows year-to-date, mostly thanks to a series of big trades in the last 10 days of the month that resulted in almost $6B of inflows.

Taking a closer look at the EMEA-listed flows, buying was diversified between exposures and between equity and fixed income. Overall, best-in-class products collected most of the flows ($4.9B), followed by ESG optimised exposures ($2.3B), and factor ESG strategies ($0.4B).

Equity flows, which accounted for $5.6B, were led by ESG optimised products ($2.3B), followed by ESG best in class ($1.7B), and factor ESG ($0.4B). In terms of geographic exposures, the majority of the flows were across US-focused products.

Fixed income flows accounted for $3.4B, with $3.1B of this going into best in class strategies, mostly in European exposures.

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