Non-U.S. equity funds experienced record flows of $30.4bn for the month, including broad Europe accelerating to $9.3bn following the French election, and broad EM reaching a nine-month high of $5.7bn.
Fixed income remained on track for a second consecutive record year by gathering another $14.3bn, led by investment grade flows of $6.8bn (the best month ever) and followed by EM debt with $2.1bn.
Patrick Mattar, from the iShares EMEA capital markets team at BlackRock, comments on the five key stories behind the European ETP flows in May 2017:
1. Tango in Paris
European equities’ had their biggest month since 2015. The French election has seemingly assuaged some concerns around European political risks, paving the way for allocations to European assets.
2. Factoring in flows to value
Over the last 12 months, there has been a clear rotation out of the low volatility factor towards the value factor. The US election was seemingly the catalyst –since October there have been inflows of $3.8bn into European-domiciled value ETFs.
3. Emphatic run for EM equity ETFs
2017 has been a very strong period for EM ETFs across all domiciles. The current five straight months of inflows has been the best monthly run since January 2013 when a run of seven straight months came to an end. Investors have seemingly focused on improving EM fundamentals rather than the protectionist rhetoric that characterised the US election campaign when determining their asset allocations.
4. Euro IG bounce back
Euro investment grade credit was the top category in (FI) for the first time this year. Flows into €IG have been mixed in 2017 with rumours of an ECB asset purchase taper and a 25% allocation to French issuers in €IG indices seemingly concerning investors. The cumulative net flow figure YTD is just $0.02bn.
5. Not everyone is going for gold
There is a clear juxtaposition in views between US and European investors when it comes to gold, however. While European ETPs are enjoying some time in the sun, in 3 out of five months this year there have been net outflows from US domiciled ETPs.
