Global exchange traded products once again saw record inflows in March, topping off a strong quarter with $64.8bn of inflows across asset classes, with the highest flows seen in developed market equities despite widespread uncertainty.
According to the latest monthly report from iShares, the global ETP market has seen $189.1bn of inflows over the first quarter, as the industry’s annualised growth in March accelerated to 22% versus 13% for the full year in 2016.
The quarterly flows set a record, far outpacing the previously quarterly record of $137.8bn in Q4 2014; iShares reports year-to-date flows are more than two and a half times larger than year-to-date flows a year ago.
In March alone, ETPs took in some $64.8m globally, with US equities leading the way with $26.7bn in net sales. US large caps drew in the bulk of inflows ($18.5bn), despite renewed policy uncertainty as President Donald Trump failed to push his healthcare reforms through Congress.
However, in contrast to the last few months, iShares reports that cyclical sectors of the US economy suffered outflows, with consumer services and industrials ETFs losing $800m and $600m, respectively. Overall, investors shifted back into growth-oriented funds, which took in $2.4bn, beating value-focused ETPs, which saw inflows of $1.6bn.
Meanwhile, the weaker dollar boosted inflows into emerging markets (EM), including broad EM equities, which took in $5.5bn, and EM debt with $2.1bn.
Emerging markets, especially India, were the strongest stock market performers in the first quarter of 2017. In dollar terms, MSCI India is up 17% over the first three months of the year, the best performer among emerging markets (according to data from FE). It was followed closely by MSCI Korea, which was up some 16.9%, while MSCI Emerging Markets as a whole returned 11.5%. Russia was the only outlier, down 4.6% over the quarter.
Yet overall it was developed equities that have been taking in the bulk of the money, both throughout the quarter and in March; they saw inflows of $51m over the month to 31 March, with Canada being the only region to experience outflows, while emerging market equities only gathered a net $3bn, having suffered outflows from single country funds.
Japanese and pan-European equities also remained popular with investors, taking in $7.4bn and $2.1bn, respectively. Investor optimism on Japan was particularly fuelled by the Bank of Japan’s continued purchases, while Europe was supported as investors’ fears over the rise of populism in the bloc were somewhat calmed by the victory of the incumbent party in the Dutch elections on the 15 March.
Investor optimism for the market was so strong that even fixed income ETPs gathered assets in March, despite the US Federal Reserve’s interest rate hike, with $12.4bn of overall inflows.
As we begin the second quarter of the year, it remains to be seen whether this optimism will be founded, as market uncertainty and volatility persists.
Below is the total performance and cumulated flow for Developed stocks (Year-to-date). It shows constant increase in inflows since few months.