Fixed income inflows hit an all-time high during October, driving up flows in global exchange traded products (ETPs).
Global ETP flows reached a 15-month high of $37.3 billion (€29.9 billion) during the autumn month, with fixed income taking in the lion’s share of with $19.9 billion.
So-called “safe haven” fixed income categories performed best, such as US treasury funds, broad/aggregate US exposures and investment grade corporate, according to BlackRock’s Global ETP landscape report for October.
High yield corporate bond funds regained momentum during the month, drawing in $2.3 billion, after a pullback in July fuelled by fears that the US Federal Reserve would accelerate the timetable for raising interest rates.
Overall, income-orientated funds brought in $7.5 billion, with flows concentrated in high yield corporate, dividend income equity and real estate.
Ursula Marchioni, head of ETP research for Europe, the Middle East and Asia, at iShares, says: “The recent volatility in equity markets, combined with the persistently low interest rate environment, pushed investors to intensify their search for yield.”
In addition, the report shows that equity flows of $17 billion during October were mostly down to US large cap and broad market funds, as a result of steady economic growth.
In emerging markets, tactical trading in broad funds led to equity redemptions of $3 billion.
The report suggests that opportunities remain for selective investors in areas such as China, where valuations are considered low and further reforms like the Shanghai-Hong Kong Stock Connect are generating interest.
The US economy may be the healthiest in the world, according to the report, with factors such as the official end of quantitative easing and a good start to the earnings season being positive signs.
In contrast, the Bank of Japan and the European Central Bank stepped up their stimulus efforts, with the former drastically increasing its asset purchase programme.
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