Favourable outlooks for broad Europe and emerging markets drove strong flows into non-US equity ETFs in April.
That was the major insight that global fund provider BlackRock reported in its latest ETP landscape report, according to ETF Strategy
ETFs with risk-on European exposures enjoyed US$3.6 billion in inflows from global investors, adding to gains worth US$4.9 billion in March. “Flows into European equities continued, seemingly spurred on by the French election first-round result and consensus-beating earnings numbers,” said Patrick Mattar of the iShares EMEA capital markets team at BlackRock.
He also noted that April was the first month since 2015 wherein flows into US-domiciled European equity funds outpaced flows into their European-domiciled counterparts.
April was also the third month of net-positive inflows for emerging-markets equity ETFs, with the segment gaining US$3.9 billion. According to Mattar, the three-month uptrend confirms a re-strengthening of confidence in the region following three months of outflows, which were presumably precipitated by US president Donald Trump’s protectionist pronouncements in November.
April saw inflows into European-domiciled equity ETFs (US$1.29 billion) continue to surpass those into fixed-income ETFs (US$1.27 billion), though the gap has shrunk considerably. Over the previous 12 months, European equity ETFs enjoyed US$40.2 billion in inflows, compared to US$21.6 billion for European bond ETFs.
Looking at fixed-income funds overall, BlackRock reported inflows amounting to US$11.6 billion — the fourth consecutive month of net gatherings exceeding US$10 billion for the sector. The best-gaining asset classes within the group for the month were emerging-markets debt (US$2.3 billion), investment-grade corporate bonds (US$2.1 billion), and US Treasuries (US$2.0 billion).
Mattar said that emerging-market debt has consistently taken the largest inflows among fixed-income ETF asset classes this year. “Both local and hard-currency funds have generated significant inflows this year, contrary to market expectations given President Trump’s protectionist rhetoric,” he said. “At the same time, US$1.1 billion has flowed out of Euro investment grade year-to-date, exiting core European exposures with outflows increasing following the first round of the French election.”
The report also uncovered an apparent divergence of views on US equities, with European investors overall shunning them in favour of European equity ETFs.
“US equity exposures have taken US$170bn in the six months since the US election, the largest flow category in the global ETF space over this period,” Mattar said. “The US$1.6bn outflow from European-domiciled US equity funds in April was the largest outflow category of all within the European-domiciled space, and the largest monthly outflow from US equities since March 2015.”
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