ETP flows show Fed tapering worries resurfacing

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Emerging markets experienced exchange traded product outflows during November, reversing on trends in recent months and reflecting the resurfacing of worries about the impact US Fed tapering will have on them. 

According to Blackrock’s global ETP landscape report for November, global ETP flows moderated over the month, gathering $15.8bn In line with trend over the year, flows over the month continued to be heavily concentrated in equities. The most popular equity ETPs this month were broad US and developed markets while emerging markets, in contrast to recent months, saw outflows.

Raj Seshadri, head of BlackRock ETP Insights, says the EM outflows were likely attributable to sensitivity around US monetary policy, with expectations resurfacing that Fed tapering may come sooner rather than later. 

While developed markets experienced inflows of $21.5bn, emerging markets suffered outflows of $4.7bn. tapering

Pan European flows maintained momentum, gathering $3.5bn, although the pace slowed from the record setting totals witnessed in the prior three months. Year-to-date the category has gathered $24bn in contrast to outflows of $6.5bn from German ETPs.

US equities gathered $9.9bn, with investors cautious and looking to protect gains amid concerns that valuations may be stretched. Large cap and sector funds fared the best but were offset by small cap redemptions.

Fixed income global ETP flows reached just $0.9bn in November and continued to be split sharply by duration, with short maturity gathering $1.9bn.

European fixed income ETPs are feeling very little impact from the turmoil related to the Fed, taking in another $400 million in November for year-to-date inflows of $6.4 bn.

Broad aggregate and short maturity US exposures as well as European sovereign debt were in demand over the month, but investment grade corporate continued to experience outflows and High Yield flows moderated after an impressive October.


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