Net inflows into European-domiciled ETPs in January were the seventh largest on record and the highest since August 2015, as equity products attracted investors once again, according to the latest monthly report from iShares.
Beneficiaries in January
European-domiciled equity ETPs took in $6.8bn during the first month of 2017, surpassing fixed income inflows of $2.7bn for the fourth month in a row. This marks a reversal from the first nine months of 2016, which saw fixed income ETPs gather $27.2bn, compared to just $3.1bn total inflows into equities. Since October 2016, however, equity ETPs in Europe have gathered $21.3bn, while fixed income flows have been flat.
Broad US and European equity ETFs were the biggest beneficiaries, collection $2.7bn and $1.7bn respectively, with January marking the fourth consecutive month of inflows into European equity funds following ten consecutive months of redemptions. According to iShares, flows into European and US equities have started to move “in tandem” again, having diverged over much of the previous two years, which is an indicator of “renewed appetite for risk assets on a global scale”.
Japanese equity funds also continued to see a turnaround in flow dynamics, with European investors putting in a net $100m, This marked the fourth consecutive month of inflows following nine months of outflows which saw investors pull some $7bn from Japanese equity ETPs. Globally, Japanese equity products took in $10.7bn in January.
Divergence in European and global investors’ attitudes
Meanwhile, there was an interesting divergence in the attitudes of European and global investors to gold and emerging markets.
European allocators bought $400m worth of gold ETPs in January, while global investors continued to withdraw money from gold, taking out $700m to lead aggregate flows into negative territory.
Gold has seen outflows since the US election in November, when the victory of Donald Trump triggered a positive response from the markets and a rally in equities. However, the data suggests European investors are more focused on portoflio diversification than their global counterparts.
In emerging markets, European investors have been buying up debt and selling equity exposure, while global investors are more interested in equity funds. The asset class saw large outflows at the end of the year, following the US election result which led to a stronger dollar.