Follow the flows
Global Exchange Traded Products (ETPs) attracted over $1 billion during the first week of April as US equity ETPs suffered significant outflows. It followed the largest ever March inflow for European-domiciled ETPs.
For the first time since October 2016, equities experienced a net weekly outflow, with fixed income ETPs inflows exceeding equities for the first time since January this year.
Rob Powell from BlackRock says the attractive and relatively high quality yield have been key drivers of flows into fixed income. He also says they are seeing increasing usage of Exchange Traded Funds (ETFs) in place of derivatives given the increasing liquidity profile of the product, which provides better tracking with less basic risk to the underlying cash bond markets.
The $10.3 billion withdrawn from US equity ETPs is the largest weekly outflow from this category since May 2016 and the seventh largest since 2012. On the flip side, broad developed markets, European and emerging market equities across all domiciles continued to see broad-based buying.
This highlights the shift in focus to the ‘pure’ reflation theme whereby emerging markets are a likely winner in what is a higher global growth environment.
When it comes to Exchange Traded Commodities (ETCs) flows into gold funds domiciled outside of Europe have been less consistent, with European investors appearing to be more focussed on portfolio diversification than those elsewhere.