Global ETP flows registered $55.2bn in July, the highest amount seen in 2016. Of this, US equity inflows accounted for $32bn. Blackrock said this was helped by continued strength in dividend-weighted and minimum volatility strategies with inflows of $4.8bn and $1.4bn, respectively.
The flows were supported by “relatively resilient markets” and lower-than-expected signs of stress in the immediate aftermaths of the Brexit vote, BlackRock noted.
The flows are likely to have come predominantly from US-based investors as their European counterparts haven’t showm a great deal of interest in US equity ETFs so far this year. While they have been taking money out of active funds during the first six months of the year, passive flows have been almost flat. And European fund buyers are not likely to have embarked on a US equity shopping spree in July, according to Expert Investor’s most recent investment sentiment data.
Fixed income flows also accelerated to $13.9bn, driven by investment grade and high yield corporate bonds with $7bn combined.
The largest flow volumes in July were into emerging market equities ($8.2bn) and emerging market debt ($3.9bn).
Chief strategist for iShares EMEA Ursula Marchioni said: “In July, investors didn’t panic or try to de-risk portfolios, but rather capitalised on some buying opportunities and continued to search for yield in a low return environment which is even more likely to continue. “In a record month for global ETPs, US equities and emerging market debt and equity were the flavours of the month. There were a number of records and milestones across different asset classes during the month, with minimum volatility funds surpassing $50bn in assets and broad emerging market equity as well as emerging market debt funds both reaching new monthly highs.”
“Emerging markets were the standout for the month, with $11.2bn of flows into debt and equities products,” Marchioni continued. “Although counter-intuitive, emerging markets seem to have earned a safe-haven status due to the perceived distance from volatility driven by developed markets, combined with a view that market conditions will unlikely bring Fed tightening and a strong dollar anytime soon.”