BlackRock – hunt for yield and equities rotation into domestic markets drove best ever European-domiciled ETP flows in 2015…
Ursula Marchioni, Chief Strategist EMEA, iShares
· Global ETPs gathered a record $351.8bn thanks to increasing fixed income adoption and record results for non-U.S. developed markets flows as investors looked outside the U.S. for better returns.
· Sentiment towards developed market equities was the biggest theme for global ETPs. Strong equity markets in the Eurozone and Japan during the first half of 2015 drove most of these flows, supported by a resurgence of flows into U.S. equity exposures during the second half of the year. For non-U.S. developed markets, nearly two-thirds of the total flows came in the first half of the year, led by currency-hedged equity funds which gathered $52.4bn, significantly outpacing their previous full-year record of $20.1bn set in 2013.
· Globally, currency-hedged equity gathered $52.4bn and smart beta equity added $29.3bn, together representing a third of all equity flows, compared to 25% in 2014.
· While equity ETPs led global flows, fixed income flows led from an organic growth perspective – with the percentage of total assets made up by new assets standing at 21.6% and eclipsing the record set in 2014. Fixed income accounted for 27% of global ETP flows this year, including 24% in the U.S., 37% in Europe and 30% in Canada.
· Global fixed income flows were dominated by strong interest in sovereign bond funds (especially U.S. Treasuries) in the first half of the year. Flows into investment grade corporate debt were stronger than into government bonds in the second half, as the possibility of a rate hike by the U.S. Federal Reserve increased – corporate bond funds
· For Europe-domiciled ETPs flows into equity exposures totaled $50.6bn, followed by fixed income at $30.3bn. Both asset classes had record years, accumulating the highest-ever full-year flows. Equity ETPs saw most of the flows for 2015 concentrated in Eurozone exposures. In fixed income, Europe-domiciled corporate and sovereign bond funds led most of the flows into the category following ECB buying and prospects for additional stimulus. At $16.5bn, 2015 flows into Europe-domiciled investment grade and high yield bond ETPs stands ahead of their 2014’s record pace of $11.8bn.
· Organic growth for ETP assets in Europe stood at 18%, its highest growth rate in the past five years, outpacing growth in the U.S. at +11.4% and 11.6% in global ex-Europe figure.
Commenting on the flows into globally and European-domiciled products, Ursula Marchioni, Chief Strategist for iShares EMEA, said: “2015 was a record year for the European exchange traded products industry, both for equity and fixed income products.
“Two big themes drove this: firstly, central bank divergence resulting in a shift out of US assets into European investors’ domestic markets. Secondly, European investors searching for yield bought investment grade, high yield and emerging market debt products issued by European and U.S.-based companies, attracted by the yield on offer compared to developed market government bonds. This trend slowed during the summer when increased volatility drove many investors to ‘safe haven’ government bonds, but the overall trend remained strong all year long.
“The global industry set an annual record thanks to increasing fixed income adoption and noteworthy non-U.S. developed markets flows. It was a year of many ‘firsts’ – to name two: global fixed income ETP assets exceeded $500bn mark for the first time in October 2015. Global currency-hedged equity ETP assets crossed $100bn mark for the first time.“