May was a golden month for exchange-traded product (ETP) investors in a year of defensive positioning, according to the latest market analysis by BlackRock.
The just-published BlackRock ‘Global ETP Landscape’ May report reveals gold and gold-mining ETPs topped the net flow figures for the month with the sector up by US$5.4 billion.
Investment-grade debt (US$2.8 billion) also attracted ETP fans over May with real estate and broad US debt funds garnering about US$2 billion apiece.
Broad European equities saw the largest net outflows (-US$3.9 billion) with most other ETP share sectors also in the red during the pre-Brexit month of May.
“With little momentum for equities, investors continued to move into fixed income funds, which have brought in nearly 40% more year-to-date than during the same period last year on the way to a record high,” the BlackRock report says.
In spite of the muted demand for broader equity products, the smart-beta styled ‘minimum volatility ETPs continue to gain investor support, according to the BlackRock research.
“With uncertainty over global growth impacting stock returns, investors have already allocated $14.4bn to minimum volatility year-to-date, more than the $11.6bn for all of last year,” the study says. “As a result, assets have more than doubled in just two years.”
The BlackRock market stats also reflect the intense global search for yield with the combined six income-oriented ETP strategies – high-yield dividend, real estate, preferred stock, high-yield corporate, emerging market debt, and municipals – on course to break the US$53.4 billion flow record set in 2012.
According to the report, the strong appetite for income ETPs was driven by “persistently low” global interest rates and spike in the relative payout value of yield-focused funds compared to the “difficult year for equity performance”.
“Record flows into fixed income ETPs, with investors exhibiting a willingness to take on more risk for income from categories such as high yield corporate bonds and EM debt, in addition to less risky areas including municipals,” BlackRock says.
While year-to-date total flows of US$93.4 billion are about US$30 billion off the same time last year, the global ETP market cracked through the US$3 trillion mark during the period as the number of products on offer grew from 5,885 to 6,073.
With over US$1.15 trillion under management, the BlackRock-owned iShares retained its number one position in the ETP market, albeit giving up 0.5 per cent market share to the second-placed Vanguard (almost US$555 trillion) over the year to date.