Exchange traded product (ETP) investors are piling cash in to equities as low interest rates and speculation about monetary easing by the European Central Bank encouraged risk appetite.
One ETP market tipped for growth is the corporate segment, which has shown consistent strength over the last two years, yet ETPs only account for 0.5% of assets in contrast to 17% for mutual funds.
Corporates offer ‘tremendous potential’ in a low yield environment for investors seeking income because the segment has the potential to offer yields above the rate of inflation, says investment house BlackRock.
The group has compiled an ETP market report for July that shows:
- Global ETPs attracted total inflows of $22.6 billion, adding $21.0 billion, primarily to US equities. US Large Cap products attracted $6.9 billion, while more economically sensitive US Small Cap inflows reached a nine-month high of $2.3 billion.
- Equity Income strategies remained a major draw for ETP investors. High-Dividend Yield, Real Estate and Preferred Stock ETPs generated a combined $3.1 billion. Investor use of higher-yielding Equity ETPs in their search for above average returns has supported year-to-date inflows of $21.0 billion into the category — 48% above last year’s comparable seven-month total of $14.2 billion.
- Emerging Markets Equity ETPs drew $3.6 billion, split evenly between broad exposure funds with $1.7 billion and country-focused exposures with $1.8 billion.
Dodd Kittsley, Global Head of ETP Research for BlackRock, said: “The continued robust growth in ETPs globally is a testament to the efficiencies that they can deliver including transparency, liquidity and precision in a diverse set of asset classes.
“The highest monthly flows into equity ETPs since January and flows in July into higher yielding fixed income ETPs suggest an overall increase in risk appetite among ETP investors.”
