European-domiciled exchange-traded products (ETPs) enjoyed strong inflows again in May, taking in $11bn in the largest monthly inflows so far this year and the strongest sales on record for the month of May, according to BlackRock’s latest monthly ETP Landscape report.
Equities continued to dominate over fixed income, taking in more than double the flows at $6.8bn, while bond ETPs drew in $3.1bn; this marks the eighth month in a row that equities have remained popular with investors.
European equities were particularly favoured, enjoying their largest month of inflows since December 2015 at $3bn. This mirrors a similar trend in US-domiciled ETPs, where European equity ETFs gathered $5.4bn during the month.
The combined $8.4bn added to European equities across all domiciles was the largest monthly amount since August 2015, according to the report, suggesting the outcome of the French election may have lifted investors’ concerns about the region.
The election resulted in Emmanuel Macron, leader of the En Marche! party, triumphing over National Front leader Marine Le Pen in a clear sign that populism was not as big a danger to the European Union as some had feared, and the French stockmarket has reacted euphorically to the news.
Emerging market equity ETFs also saw strong support in May, drawing in net inflows for the fourth month in a row and the largest monthly amount since last August. The recent inflows mark a reversal of three months of outflows from the region’s stockmarkets, as investors were spooked by Donald Trump winning the US presidential election.
BlackRock’s report said: “Investors have seemingly focused on improving EM fundamentals rather than the protectionist rhetoric that characterised the US election campaign when determining their asset allocations.”
In the fixed income space, Euro investment grade credit ETFs were the most popular asset category for the first time this year, gathering $1.1bn, despite fears about the European Central Bank (ECB) beginning to taper its asset purchase programme, which would have a negative effect on the bonds.
Emerging market debt fell back to second place in terms of inflows last month, but only just, taking in some $1bn in flows, to make total inflows so far this year $5.9bn.
Meanwhile, European investors also rushed into gold in May, as they continue to worry about crowding in successful trades and the impact of politics on the global markets, especially in the run-up to the UK General Election, which culminated in a hung parliament and further uncertainty.
European-domiciled gold ETPs attracted $600m during the month, bringing the cumulative flows this year to the end of May to $2.8bn.
This marks a “clear juxtaposition” between US and European investors, according to BlackRock. While European-listed gold ETPs have enjoyed positive flows every month this year, US investors have taken money out of these products in three out of five months over the period.
BlackRock reports that this divergence is unusual relative to recent history, pointing to the fact there were only five months in the 24 months to December 2016 where flows into gold ETPs from the US and Europe diverged.