GLOBAL ETP FLOWS OCTOBER 2020


Natasha Sarkaria 31-Oct-2020

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.

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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.

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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

Cumulative flows into inflation-linked ETPs, January-August 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

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

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.