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BlackRock: Global ETP Landscape and European ETP-Trends for January 2018

Global ETPs kicked off 2018 with record monthly flows ….

Patrick Mattar, from the capital markets team at iShares


Global ETPs gathered $100.6bn in January, marking a new record for monthly flows, propelled by U.S. and Japanese equities and bolstered by broad emerging markets (EM) equities and EM debt

U.S. equities drew in $35.8bn focused in large-caps and cyclical sector funds spurred by the U.S. tax overhaul and higher expected federal spending

Japanese equities collected $12.1bn, a new monthly best, amid improving global growth, solid earnings and support from Bank of Japan purchases

Broad EM equities and EM debt each set new monthly flow records in January with $10.6bn and $4.0bn, respectively, amid a weaker U.S. dollar and stronger commodity prices


Monthly net flow into EMEA-listed ETPs hits $14.1B 

EMEA-listed ETPs gathered $14.1B in January, equalling the largest monthly inflow of all time in January 2015.

Equities were by far the most popular asset class attracting $12.0B or 85% of the total inflow. This was the biggest inflow month of all time for EMEA-listed equities, beating the previous largest month (Nov 2016, $8.6B) by $3.4B.

Meanwhile, EMEA-listed fixed income and commodity funds attracted $1.5B and $0.7B respectively, figures that are close to their long term average monthly inflows.

Key themes this month:

EM flow-verload

January was the largest ever inflow month for EMEA-listed Emerging Market equity ETPs, as investors allocated over $2B to these funds for the first time in a calendar month.

There have now been 12 straight months of inflows to EMEAlisted EM equity ETPs, the longest inflow run on record. US-listed EM ETPs had an even better month, the $11.5B inflow smashed the previous monthly record of $8.6B in 2013.

EM domestic fundamentals remain strong and long term relative  valuations remaining attractive it appears that EM equities are in a sweet spot for investors.

Europe is back

The $3.8B added to EMEA-listed European Equity ETPs made January the largest inflow month since July 2017. There were also inflows to US-listed equivalents of $1.3B, the first time monthly flows into these funds has exceeded $1B since June 2017.

This inflow follows an outflow month in December, which ended a 15 month run of inflows for EMEA-listed European equity funds dating back to August 2016.

Looking further back, US-listed European equity funds experienced outflows of $28B between December 2015 and December 2016. Inflows since then have been virtually constant with the majority going to EMEA-listed ETPs, but the reality is that these funds are only $10B ahead of where they were in 2015 despite large growth across the rest of the industry.

EMD OMG

EMEA-listed EMD exposures had a strong start to the year, with $1.1B of purchases in January, the largest monthly inflow since July 2016. The current run rate is marginally short of the record for a first quarter, recorded last year (+$3.8B) but the January inflow is already greater than any other first quarter on record.

A strong year in 2017 kicked off with 9 straight weeks of inflows, and whilst additions are not of the same large scale as last year, 2018 has kept up thus far, with net purchases every week.

It appears that the continuing existence of near-record low yields on development market sovereign debt and investment grade credit, along with the weakening USD is continuing to drive flows into EMD ETPs.

Flowkyo Drift

European-listed Japan equity exposures have been on a seemingly unstoppable upwards trajectory since September, with a cumulative flow of over $4bn.

Flows into Japanese equities totalled $1.4B in January 2018, the second largest monthly flow ever into EMEA-listed ETPs, and the highest rate of purchases since August 2014. January’s total inflow for EMEA listed products has already reached 40% of 2017’s total inflow of $3.5B.

January also marked the fifth straight month of net inflows to Japanese exposures, and the second best start to Q1 ever, surpassed only by Q1 2015, which had inflows of $1.8B. In January 2018 inflows have already reached 78% of that figure. Investors are seemingly focusing on accommodative monetary policy alongside the sizeable valuation discount to DM peers given the strong earnings growth in 2017.

Transformers: robots reach new highs

January was the largest ever month for inflows to EMEAlisted ETFs that track robotics-related indices as investors added $585M to the 3 UCITS funds available.

If we broaden the Robotics fund universe to include USlisted ETFs and all active mutual funds globally that invest in the theme, the path of the total assets under management over the last 3 years is quite remarkable. Starting at a total of $206M in January 2015 the assets have grown to $24.4B across 16 funds.

It appears that investors are becoming increasingly comfortable using indexed vehicles to access long term thematic exposures that capture themes such as Robotics which have historically been dominated by active managers.

Source: ETFWorld

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