February Had Largest Monthly Inflow For Global ETPs

Shanny Basar
European Commodity ETFs Have Record Inflows

Equity flows set the standard

February marked the largest inflow month on record for global ETPs, with $131.7B added, beating the previous record set in November 2020 ($126.5B). In line with what we saw in November, buying was driven by inflows into equity ETPs ($108.1B), alongside inflows into fixed income ($19.4B), and outflows from commodities (-$2.5B – primarily out of gold).

Investors used rates-driven market volatility in February as an opportunity to add to risk, with the second largest inflow month for US equities on record ($61.7B) – a huge jump vs. January’s flows of $3.5B, and just shy of November 2020’s record $65B.

Embracing the barbell

Amid this record-setting month for flows, investors showed increased specificity with a significant pickup in global sector flows.

February marked a record inflow month for financials ($9.3B) and materials ($2.4B), which have been popular alongside industrials and energy as cyclical sectors that could benefit from a global growth pickup. At the other end of the sector barbell, tech inflows also hit a record $13.5B in February, vs. $8.6B in January.

Quality tilted sectors have continued to be popular with investors: healthcare flows, for example, returned to positive territory with $0.7B added in February, while traditional bond-proxy sectors like utilities and consumer staples were outliers in registering small outflows.

Credit out of favour

Global fixed income flows in February highlighted a disparity compared to equities, with a lack of conviction in rate-sensitive exposures. High yield (HY) notched up a second consecutive month of global outflows, with $1.3B of net selling, while global investment grade (IG) inflows of $4.3B went almost entirely into EMEA-listed ETPs and masked outflows from US-listed IG ETPs.

On the whole, global credit flows have lacked a clear trend since September, following a bumper $90B added to IG and HY between April and August 2020, driven by immense policy support. Since then, IG and HY have recorded just $7B of net inflows. Emerging market debt (EMD) has remained a bright spot, however, registering inflows in every month since March 2020; $2.2B was added to EMD ETPs in January, followed by a further $1.4B in February – driven driven entirely by inflows into China bond ETPs totalling $1.4B.

Source: iShares

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