ETF flows fall in May as risk appetite diverges
Analysis from BlackRock and Morningstar shows that investors dialled back on ETF purchases during the month, though US fund flows rose.
Global flows into exchange-traded products (ETP) fell slightly during May compared to the previous month, according to analysis from asset manager BlackRock.
Purchases of ETPs – which mostly comprise exchange-traded funds (ETFs) as well as some similar products – fell to $199.4 billion in May, from $212.4 billion the previous month.
The dip was driven mostly by a sharp fall in equity fund inflows, which dropped to $106.4 billion – the lowest month for global equity ETP inflows since January.
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Similarly, analysis from investment research firm Morningstar found that European ETF and ETC flows fell from €40.2 billion in April to €38.0 billion in May.
“Investor demand for ETFs remained resilient in May, even as flows moderated slightly from April’s peak,” said Jose Garcia-Zarate, senior principal at Morningstar. “Equities continued to dominate allocations, supported by strong market performance and sustained interest in US exposure.”
Which ETP sectors saw the largest flows during May?
Recent analysis of the most popular funds and stocks with DIY investors on Interactive Investor revealed a split between cautious strategies and risk-seekers, a trend also borne out by BlackRock’s analysis.
While fixed-income ETPs recorded their largest month of inflows on record ($87.7 billion), suggesting a cautious market, within equity ETPs technology was the most popular sector, attracting $14.4 billion of inflows.
Besides tech, the only sectors to record meaningful inflows were industrials ($2.7 billion) and energy ($1.5 billion), according to BlackRock.
Morningstar’s data also pointed towards high demand for tech ETFs. Garcia-Zarate attributed much of this demand to the forthcoming SpaceX IPO.
“VanEck Space Innovators ETF (LON:JEDG) [was] among the top 10 flow-gathering ETFs in May,” he said.
Unsurprisingly given the demand for tech-focused ETFs, funds targeting the US saw the largest inflows. Of regionally focused ETPs, BlackRock’s analysis found only those targeting the US received positive flows – and even these dipped to $103.3 billion, from $121.9 billion in April.
Emerging market equity ETPs saw monthly outflows of $40.4 billion, the largest negative flows of any region’s ETPs.
