Global ETP flows surged to $55.2bn, the best month since December 2014, as investors sought yield and asset categories less affected by Brexit, according to BlackRock’s ETP landscape report.
Flows grew quickly in the first two weeks of the month, favoring US and emerging markets (EM) equities as well as EM and corporate debt.
Total equity flows climbed to $34.1bn, the best month for the asset class this year, due in large measure to US equity flows which rebounded sharply to $32bn in July led by US large cap inflows of $21bn.
European equities on the other hand saw consistent outflows throughout the month. Pan-European equities shed ($6.7bn), deepening considerably from prior months and, marking a sixth consecutive month of withdrawals. Additionally, German equities reversed course with ($0.8bn) and UK equities shed ($0.2bn).
Meanwhile, fixed income flows rebounded to $13.9bn overall and remain poised for a record year. Inflows were focused in higher-yielding categories: investment grade and high yield corporate bond funds brought in $4.9bn and $2.2bn, respectively, and broad US debt funds added $2.4bn while Treasury funds shed ($0.6bn), chiefly from short duration.
Gold funds drew in $3.2bn as investors continued to seek a counterweight to negative rates and heightened volatility. Year-to-date flows climbed to $25.1bn, higher than 2009’s record full-year flows of $17bn.
Outside of gold, broad market commodity funds added $1.3bn, nearly doubling the year-to-date total and just shy of the monthly record from 2011. Additionally, volatility-linked alternative funds resumed inflows with $1bn.
“In July, investors didn’t panic or try to de-risk portfolios, but rather capitalised on some buying opportunities and continued to search for yield in a low return environment which is even more likely to continue,” said Ursula Marchioni, chief strategist for iShares EMEA at Blackrock.
“Emerging markets were the standout for the month, with $12.1bn of flows into debt and equities products. Although counter-intuitive, emerging markets seem to have earned a safe haven status due to the perceived distance from volatility driven by developed markets, combined with a view that market conditions will unlikely bring Fed tightening and a strong dollar anytime soon,” Marchioni said.