The Great Rotation in reverse – fixed income ETF inflows reach record

European investors have been pouring unprecedented amounts of money into fixed income ETFs this year, while they are taking money out of equity ETFs, according to data from Blackrock.

The Great Rotation in reverse – fixed income ETF inflows reach record

So far this year, fixed income ETFs listed in Europe have seen $13.2bn (€11.6bn) in net inflows in the first four months of the year, while equity ETFs have witnessed redemptions of $3.6bn.

While the ECBs decision in March to include the purchase of corporate bonds in their QE programme will have helped the popularity of corporate bond ETFs in Europe, there is more than that to the current trend. Investors in the US have also embraced fixed income ETFs, pouring $35bn into the category year-to-date.

Fixed income ETFs - A global trend

 

Fixed income index trackers have attracted a record $52.2bn in net inflows globally this year, four-fold the amount invested in equity ETFs. Only in Asia Pacific, equity ETFs have continued their popularity. Net inflows this year amount to $12.7bn despite $6bn of net outflows in April, compared to just $2.7bn for fixed income ETFs.

All fixed income categories have seen positive ETF flows this year, apart from non-US government bonds. Investment-grade corporate bonds have been most popular, followed by high-yield bonds. In April, EM debt ETFs enjoyed a spike in popularity, with the bulk of inflows ($2.1bn) coming from European investors, who apparently have dismissed fears about a lack of liquidity potentially affecting ETF investors in these markets.

EM and Europe – Popularity swap

Worth noting from Blackrock’s ETF report is also that one of the least-loved asset classes of the past couple of years with passive investors, emerging market equities, has now become the most popular. Year-to-date inflows amount to $11.5 bn. These figures correspond with Expert Investor’s latest investment sentiment data, which show that European fund buyers are returning to emerging market equities.

At least as remarkable, however, is the fact that the most popular asset class in recent years, European equities, has suffered the biggest outflows this year: $-15.5bn. This tentative trend hasn’t been fully captured by Expert Investor data yet, but our latest data collected in April suggest appetite is at last coming down a bit. To be continued...

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About Author

Tjibbe Hoekstra

Senior Reporter

Tjibbe joined Expert Investor as a senior reporter in March 2014. Before moving to London he worked as a financial news reporter for various news outlets in Amsterdam, including Reuters and ANP, the main news agency in the Netherlands. He also worked for Fondsnieuws, a website and magazine for finance professionals in the Netherlands. Tjibbe holds a MSc in Public Administration and a post-graduate diploma in Journalism.

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