The global ETP industry, which includes both exchange traded funds and exchange traded notes, attracted $61.2 billion in inflows over January, the best monthly flows since September 2008 and a record for the first month of the year, as optimism over U.S. markets and Japanese equities helped fuel the risk-on atmosphere, according to a BlackRock research note.
U.S. equities added $19.3 billion as global reflationary trends strengthened cyclical exposures, including $4.3 billion flowing into small-caps and $4.1 billion into mid-caps. Additionally, cyclical themes also attracted heavy inflows, with $1.5 billion in real estate, $1.4 billion in technology and $1.3 billion in financial equity sector funds. Value continued to gain momentum as investors funneled $3.9 billion into value funds.
“Value stocks trade at lower prices relative to their fundamentals and have historically outperformed during periods of economic reflation,” according to BlackRock.
Japanese equities also saw a record $10.7 billion in monthly inflows due to the depreciating yen currency, rising inflation and improved earnings expectations. The export-heavy economy is seen as more competitive in a weak JPY environment, and the economy is finally showing signs of inflation.
Broad emerging market equity ETPs gathered $2.5 billion as a more measured U.S. dollar and rise in global reflation helped push investors toward these riskier segments.