The outlook for exchange traded products in 2018

Rob Powell, product strategist for BlackRock’s iShares Capital Markets team, speaks to Victoria Scholar about the outlook for ETP fund flows in 2018.

The value of investments can fall as well as rise, and you may get back less than you invested. Past performance is no guarantee of future results

Exchange traded products (ETPs) are increasingly becoming a key component of an investor’s portfolio due to their simplicity and their ability to offer bespoke exposure along with diversification across asset classes.

BlackRock’s iShares business is the world’s largest exchange traded fund (ETF) provider. Rob Powell, product strategist for the iShares capital markets team, looks at whether 2018 could be another record year for flows. He also sets out which geographies and asset classes look most attractive in the year ahead.

ETP fund flows in 2017

ETPs saw an impressive year in 2017. According to BlackRock, net inflows broke the $600 billion mark globally for the first time ever in a calendar year. That far surpassed the previous calendar year’s total of $378 billion and represents more than 2012 and 2013’s inflows combined.

BlackRock has identified the key winners and losers in 2017 compared with 2016. Flows poured into European equity ETPs as the dominance of US equity products declined. Developed and emerging markets also increased their share of the total. In fixed income, investment grade credit performed best, receiving $50 billion of inflows. It was a disappointing year for commodities, in particular gold. The precious metal saw inflows drop by $11 billion.

Europe rebounds, emerging markets in demand

According to BlackRock, one key trend was the ‘spectacular’ rebound for Europe after an extremely underwhelming nine months of outflows between January and September in 2016. European and US investors both steered money into European equities in 2017, with inflows surpassing $40 billion over the year.

Another key trend pointed out by BlackRock was the demand for emerging market ETPs, particularly towards the end of the year. According to their analysis, combined total inflows for emerging markets assets hit $67.9 billion, just shy of the record level achieved in 2012.

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