This cautious investor mindset was also reflected in fixed income ETP flows. These funds attracted $9.5bn in April, the best performance since May of 2012, with US Treasuries funds leading the way. US Treasuries garnered $2.2bn of inflows despite a continued environment of persistently low yields. Short Maturity funds also remained a focus, gathering $5.6bn, although it’s worth noting that other maturities fared well for the second straight month after a slow start to the year.
Meanwhile, global stock funds took in $9.6 billion, which was down from $18bn in March, despite the S&P 500 remaining near its all-time high. US large cap stock funds swung to outflows mid-month on the heels of lackluster reports on US and Chinese economic growth, but finished the month in positive territory with inflows of $1.7bn. Investor preference for developed markets over emerging also continued, albeit at a slower pace than prior months with $3.5bn in outflows for April among ETPs offering emerging market equity exposure. Within developed markets, ETPs offering exposure to Japan equities led the way taking in another $4.8bn in new assets for the month.
In an interesting development, non-market cap weighted funds have captured 42% of equity ETP flows year-to-date. That is more than two times their share of equity assets. A big driver of this growth is investor demand for dividend income funds, with these ETPs attracting $3.4bn of flows in April – a new record monthly high. Also driving this growth into non-market cap weighted funds – flows into minimum volatility funds. The concept behind these funds is that they track indexes that seek to capture the broad equity market exposure of a particular market segment – like emerging markets or global stocks — with a reduced amount of volatility. This focus by investors on non-market cap weighted funds is a trend we are keeping our eye on and will delve into in more depth in a future blog.
Dodd Kittsley, CFA, is the Head of Global ETP Market Trends Research for BlackRock.