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This section includes investor type descriptions for professional clients and market counterparties.
Professional client
A Professional Client is either: (i) a ‘deemed’ professional client; (ii) serviced-based professional client; or (iii) an assessed professional Client
(i) Deemed Professional Client
A person is a “deemed” professional client if the person is:
- a supranational organisation whose members are either countries, central banks or national monetary authorities
• a government, government agency, central bank or other national monetary authority of any country or jurisdiction
• a public authority or state investment body
• an Authorised Market Institution, Regulated Exchange or regulated clearing house
• a Regulated Financial Institution or the management company of a regulated pension fund;
• a Collective Investment Fund or a regulated pension fund;
• a corporate body whose shares are listed or admitted to trading on any exchange of an IOCSO member country
• trustee of a trust which has, or had during the previous 12 months, assets of at least $10 million;
• a Single Family Office licensed under the Single Family Office Regulations
• a person classified as a ‘large undertaking’ who meetstwoof the following criteria (i) a balance sheet total of at least $20 million; (ii) a net annual turnover of at least $40 million or (iii) own funds or called up capital of at least $2 million
(ii) Service-based Professional Clients
A person is a ‘serviced-based’ professional client if
- the services provided to the client is in relation to the provision of credit including arranging and/or advising on credit
• the services provided to the client relates to corporate structuring and financing such as advice relating to an acquisition, disposal, structuring, restructuring, financing or refinancing of a corporation or other legal entity i.e. takeovers, mergers and capital raising
(iii) Assessed-based Professional Clients
Assessed-based professional clients can be either (i) individuals; or (ii) undertakings
Individuals
An individual (and associated joint account holders) would be classified as an ‘assessed-based professional client’ if:
- the individual (and primary account holder, if relevant) has net assets of at least $1 million; and
• the individual is, or has been, an employee of an authorised firm or a regulated financial institution in the past two years; or
• the individual can provide evidence which demonstrates that they have sufficient knowledge and experience of relevant markets, products and associated risks
Where there is a joint account in place, the secondary account holder must obtain confirmation in writing that investment decisions relating to the joint account are made for or on behalf of the secondary account holder
Undertakings
Undertakings, which are generally not individuals, would be classified as ‘assessed-based’ professional clients if it:
- has own funds or called up capital of at least $1 million; and
• can evidence that they have sufficient knowledge and experience of relevant markets, products and associated risks
Market counterparties
A Market Counterparty is any person who is either:
- authorised firm;
• regulated financial institution; or
• professional client
Key themes in October:
- Pre-election jitters: US equity flows fell to their lowest level since July
- Eyes on China: flows into China bonds and equities continued
- A steady rate: rates inflows matched the previous month
Unless otherwise stated all data is sourced from the BlackRock Global ETP Landscape (a BlackRock tool that sources data from BlackRock and Markit) at 31 October 2020. All amounts given in USD.
Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.
Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time.
1. Pre-election jitters
- We saw an overall drop in flows into US equity exposures in the run up to the US election. US equity ETP inflows fell to their lowest level since July – in a similar manner to the trend we saw ahead of the 2016 US election – with just over $4.4B of inflows in October 2020 compared to almost $17B in September. International investor sentiment appears to have been a large driver of this fall; EMEA-listed US equity ETP inflows dropped to just 15% vs. September’s inflows.
- At the same time, the recent trend of selectivity in US equity flows continued, with cyclicals remaining in favour. Sectors such as materials and industrials gathered inflows, while healthcare continued to post outflows despite some inflows at the global sector level. Tech remains popular with $1.3B added in October.
- Overall global equity Inflows in October were largely driven by a pickup in emerging market (EM) and broad developed market buying, which helped to offset the drop in US equity buying, and European equity flows turning negative for the first time since June (-$1.8B).
Positioning for the election
Cumulative flows into US equity ETPs, 2016 vs. 2020
Source: BlackRock Global ETP Landscape (a BlackRock tool that sources data from BlackRock and Markit) at 31 October 2020.
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2. Eyes on China
- EM debt ETPs have consistently gathered inflows since March, with $12.6B added since the mammoth $8.3B that was lost in March. October’s inflows of $3.6B continued to show a large preference for hard currency products, while China bonds remain popular. The $0.9B added in October – largely into EMEA-listed ETPs – is the second highest inflow month of the year (after a record $1.1B in August).
- Investors simultaneously continued to allocate to Chinese equities, with $1.5B added in October, driven by buying in US and EMEA-listed products. In fact, APAC-listed flows into China equities amounted to just 27% of the monthly inflows, following the trend that we saw towards the end of 2019 of international money outpacing domestic inflows.
- Inflows into EM equity continued to be fairly well split between single country and broad EM exposures. This marks a change from the inflows we saw after the Covid volatility earlier this year; inflows in March and July were almost entirely into single country ETPs.
International love
Monthly flows into China bonds, split by listing region, January-October 2020
Source: BlackRock Global ETP Landscape (a BlackRock tool that sources data from BlackRock and Markit) at 31 October 2020.
3. A steady rate
- Rates flows remained remarkably consistent in October, matching September’s inflows of $4.4B, off the back of lacklustre flows over the summer. Inflows into US sovereigns continued to dominate, albeit to a lesser extent than in September ($2.4B vs. $4B, respectively). In the credit space, investment grade (IG) flows appeared to have found a more solid footing in October, while high yield (HY) flows started to recover before dropping off to close the month $1.7B out.
- The rest of the flows in rates were spread across sovereign exposures, with eurozone rates gathering $0.3B of inflows, helping to compensate for the $0.4B of outflows in September. October also saw inflows into single country sovereigns such as Italy and Germany.
- Investors continued to allocate to inflation linkers with a further $2.3B added in October – the fourth highest monthly inflows of the year) This takes YTD flows to $11.5B, just short of 2016’s record inflows ($11.9B).
Fixed income rotation
Cumulative flows into IG, HY, rates and inflation linked ETPs, September-October 2020
Source: BlackRock Global ETP Landscape (a BlackRock tool that sources data from BlackRock and Markit) at 31 October 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.
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