Growing divide in US investor favour

The US remains the largest market in terms of ETPs, mainly as they started earlier than other markets, and this is reflected in its share of the total market at approximately 70.6 per cent, according to the BlackRock ETP Landscape report for May.

Interestingly the size of the market is not determined by the number of products available, with Europe falling into second place in terms of market share by asset size yet it has almost 600 more listed ETPs than the US.

In terms of the exposure, however, the global ETP market has been driven primarily by flows into fixed income rather than equities, with the report highlighting longer duration US Treasuries, European government bonds, investment-grade corporate debt and broad developed market fixed income as specific beneficiaries of investor sentiment.

That said, some equity regions have seen continued strong inflows, with European equity ETPs inflows of approximately $4.6bn (£2.7bn) of inflows, including $3.6bn in broader pan-European ETPs.

This move towards Europe has no doubt benefited from the improved economic outlook in the region, and the recent announcement by the ECB on monetary stimulus measures is only likely to increase the popularity of the region.

Meanwhile figures show that there is a growing divide among investors between those that favour the US and those that don’t. According to the ETP Landscape report, emerging markets saw a second month of strong positive inflows, of roughly $2.7bn, in spite of the wider perceived negativity around the asset class and region following last year’s sell-off.

This could demonstrate a turning point in attitude if this should continue for future months, while the US equity ETPs seem to have had a reversal of fortune.

The report notes that US equity flows were down $5.1bn overall in May, although not all parts of the market were hit equally hard. Instead the greatest outflows came from the US small-cap focused ETPs, with outflows of $6.2bn, while large caps gathered $1.2bn of assets during the month, slightly beaten by energy and real estate focused ETPs that recorded inflows of $1.8bn and $1.6bn respectively.

ETPs AROUND THE WORLD

Many investors have the perception that exchange-traded products are really only used in the UK and US, but it is more a global business than ever. Here, we look at the key centres of ETP business.

US

This is the biggest ETP market, with preliminary figures from ETFGI’s MAY Global ETF and ETP industry insight’s report noting the US had 1,591 ETFs/ETPs from 58 providers listed on three stock exchanges. It also notes that in May assets in US-listed exchange traded products reached $1.8trn.

EUROPE

Europe, including the UK, is the second-biggest market for exchange-traded products, with the ETFGI report noting total assets in May 2014 of $459bn. The region accounts for approximately 17.8 per cent of total market share, although it actually has more listed products than the US at approximately 2,183.

JAPAN

Japan may not be known for its exchange-traded product market, but according to ETFGI the country saw a record high of assets in May, at approximately $86.7bn. Figures from the May BlackRock ETP Landscape report, meanwhile puts the total number of products in the Asia Pacific region, including Japan, at 670 with roughly a 6.9 per cent share of the market.

CANADA

Often put into the same category as the US under the title North America, Canada nevertheless has a small but growing ETP market. The ETFGI report places Canada with approximately $63.2bn in assets at the end of May, from approximately 309 products with a 2.5 per cent share of the market.

MIDDLE EAST & AFRICA

This region is more difficult to decipher with the ETP Landscape report unable to get inflow data for May and the year-to-date. However total assets in exchange-traded products listed in these countries is believed to be approximately $46.5bn equivalent to a 1.8 per cent market share, even though it has more products than Canada at roughly 374.

LATIN AMERICA

The smallest of the global ETP markets, this region has just 40 listed products as of the end of May 2014, with just $9.5bn in assets and a 0.4 per cent share of the market. According to the research from the May ETP Landscape report, the majority of exposure is to equities, with just 1.9 per cent of flows going into fixed income ETPs.

Nyree Stewart is features editor at Investment Adviser