Overall global ETP holdings stood at 2,487 tonnes as of August 27, exceeding that held by Italy’s central bank. Gold ETPs now represent the fourth-largest holder of the metal behind central banks in the United States, Germany and the IMF.
Besides gold, we also saw investor interest increase for volatility ETPs, those funds whose performance is linked to the VIX index. Investors tend to gravitate toward volatility ETPs when they expect a meaningful change in volatility, and the segment gathered nearly $1 billion in August. Historically, in periods of market weakness, the VIX Index has demonstrated a negative correlation to the performance of US equity markets. By purchasing volatility funds, investors could be seeking a way to mitigate risk and protect their portfolio from potential losses in their equity investments.
August fund flows also showed that the hunt for yield has not yet cooled. Fixed income ETPs attracted $6.5 billion, and account for 36% of total industry inflows this year. All major fixed income categories attracted net inflows, led by investment grade corporate debt with $1.6 billion and high yield corporate with $1.3 billion.
Notably, fixed income ETPs reached a major milestone in August, taking in more than $50 billion in net new assets year to date. That surpassed the record annual inflows of $49 billion that we saw in all of 2011.
But the hunt for yield was not focused solely on fixed income funds. Investors put a combined $2.0 billion into equity dividend, real estate and preferred stock ETPs. In an upcoming blog post, I’ll explain why we believe the significant growth of these funds represents a secular trend within the industry.
Dodd Kittsley, CFA, Director, is Head of Global ETP Market Trends Research for BlackRock.