Outflows from US equities dominate ETP landscape

Outflows from US equities dominate ETP landscape

Outflows from US equity ETPs have dominated the landscape in 2015 so far, research from fund manager BlackRock has found.

Ursula Marchioni, head of ETP research at BlackRock, said US equity flows were modest at US$0.4bn (£0.25bn), but this represented an improvement from heavy outflows in April.

She said: “2015 has been so far dominated by two trends: outflows from US equity exposures and inflows into most of the other developed equity markets.

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“ETPs giving exposure to Europe, Australasia and developed markets in the Far East have seen cumulated inflows of US$35.8bn (£22.7bn) year-to-date – US$4.2bn (£2.6bn) in May alone.

“Within this trend, Japanese equity ETFs have been particularly popular, as part of a stock market surge that’s pushed the Nikkei 225 to its highest level since 2002.”

According to the BlackRock ETP Landscape report, US$18.3bn (£11.6bn) flowed into global ETPs in May, bringing year-to-date asset gathering to US$123.8bn (£78.7bn).

Pan-European equity flows had been strong all year, but slowed to US$1.6bn (£1.01bn) as economic data moderated and the euro fluctuated against the dollar.

Ms Marchioni said: “Looking at the May monthly flows, our ETP data suggests that investors’ attraction for European equities might start to cool.

“Pan-European equity funds continued to see inflows, but at a slower pace than over the past six months.

“The majority of inflows came late in the month, following news that the ECB could conduct its bond purchases earlier than anticipated.”

Fixed income flows have been flat overall and volatile, but remain ahead of 2014’s record-breaking year, which Ms Marchioni attributed to uncertainty about the timing of a US interest rates increase.

US investment-grade corporate funds, which gathered US$0.9bn (£0.57bn), and EM debt, which added US$0.5bn (£0.31bn), are two pockets of strength in fixed-income, the report said.

Deborah Fuhr, managing partner of ETFGI, said: “We have seen that the net new asset flows into ETFs are the largest ever on record.”

Adviser view

Ian Head, director of Berkshire-based Fund Management, said: “I have been taking money out of US equities because the American market looks overvalued.

“I have also started talking to clients about derisking and moving to total return funds or, to a certain extent, into property.”