Global ETP Flows May 2020

Natasha Sarkaria
Natasha Sarkaria
Investment Strategist

Key themes in May:

  1. Flat on the surface: buying and selling trends in equity net out
  2. Credit flows continue: investment grade (IG) and high yield (HY) lead the way
  3. The well dries up: oil flows drop but silver shines

Unless otherwise stated all data is sourced from BlackRock as at 31 May 2020. All amounts given in USD.

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1. Flat on the surface

  • Inflows into equity ETPs were flat in May (-$79m), but this masks divergence in investor focus. Continued outflows from emerging market (EM) and European equity ETPs (-$9.5B and -$2.6B respectively) were offset by inflows into US ($3.8B) and Japanese equities ($9B) –the latter of which was mostly into APAC-listed funds and driven by purchases by the Bank of Japan, which accounted for around half of the total.
  • EM equities have not recorded a month of inflows since January. Outflows have been indiscriminate, with investors selling out of broad EM and single country exposures.
  • Investors have continued to be selective in their equity exposure with flows into sector ETPs remaining elevated. Technology took the mantle from healthcare as the most popular sector in May, with $5.2B of inflows, up from $4.1B in April, while healthcare inflows dropped from a record $7.3B in April to $4.3B in May. Utilities and consumer staples, meanwhile, had outflows totalling $1.0B. Selectivity through factors also continued with quality being the sole factor that gained inflows in May, with $1.1B added. Value flows were flat despite a pickup in the last week of the month, which coincided with a revival in sentiment towards the factor.

Flat, but only at first glance

Monthly flows into equity ETPs, January-May 2020 (USD billions)

Flat, but only at first glance - Monthly flows into equity ETPs, January-May 2020 (USD billions)

Source: BlackRock Global ETP Landscape (a BlackRock tool that sources data from BlackRock and Markit) at 31 May 2020.

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2. Credit flows continue

  • In fixed income, inflows into credit continued to lead buying, albeit down from the record levels in April. Inflows into IG dropped slightly to $12.3B, while HY registered $7.7B of inflows. Although the vast majority of HY inflows were again focused in US-listed products, buying in EMEA-listed HY increased to $1.5B, building on the $1.1B of inflows in April, which came after a torrid couple of months that saw outflows totalling $5.2B across February and March.
  • Flows have shown evidence of differentiation in investor sentiment in credit, depending on listing region. Investors in EMEA-listed ETPs, for example, have been investing in eurozone and US IG in almost equal measures for two consecutive months now. Investors in US-listed ETPs, on the other hand, have displayed more of a domestic bias with the vast majority of money going into US credit, with small inflows into global exposures as well.
  • The pickup in fixed income flows at the headline level can be attributed to increased buying in multi-sector ETPs –which tend to track broad fixed income indices, which gathered $7.4B in May, up from $2.7B in April. This offset falling inflows into rates ETPs, with $2.7B added in May –the lowest monthly inflow since November 2019. Emerging market debt (EMD) registered $0.6B of inflows over the course of the month, although beneath the surface, there was a clear preference for hard currency (+$1.1B) over local currency.

Changing gradients

Cumulative flows into rates, IG and HY ETPs, January 2020-May 2020 (USD billions)

Changing gradients - Cumulative flows into rates, IG and HY ETPs, January 2020-May 2020 (USD billions)

Source: BlackRock Global ETP Landscape (a BlackRock tool that sources data from BlackRock and Markit) at 31 May 2020.

3. The well dries up

  • Inflows into commodities fell from April’s record levels ($21.4B) to $10.7B in May, due to a significant drop in interest in crude oil ETPs, which registered just $0.9B of inflows, compared to a record $11.4B in April, as oil price volatility dampened and investors moved away from tactical buying.
  • Inflows into precious metal ETPs, on the other hand, drove overall net buying in commodities. Gold flows dropped a little to $7.7B, with most of the buying focused in US-listed ETPs, although inflows into EMEA products increased to $2.2B.
  • Silver inflows totalled $1.2B in May –a 3x increase from the previous month, and the largest monthly inflow on record. Inflows were largely into US-listed ETPs, and demonstrate how sentiment towards silver often lags gold.

Playing catch up

Cumulative flows into gold and silver ETPs, January 2020-May 2020 (USD billions)

Playing catch up - Cumulative flows into gold and silver ETPs, January 2020-May 2020 (USD billions)

Source: BlackRock Global ETP Landscape (a BlackRock tool that sources data from BlackRock and Markit) at 31 May 2020.

Past flows into global ETPs are not a guide to current or future flows and should not be the sole factor of consideration when selecting a product. This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation to, offer or solicitation to buy or sell any financial instrument or product or to adopt any investment strategy. Investment in the products mentioned in this document may not be suitable for all investors. BlackRock has not considered the suitability of any product against your individual needs and risk tolerance.