US equity ETFs have seen bumper inflows as markets have climbed, an iShares report revealed.
The sector saw $19.3bn in inflows in January 2017, driven by an improvement in US economic activity. This was almost half of all inflows into equity ETFs for January.
Asia Pacific was the second most popular area.
European ETF growth
Joe Parkin, head of iShares UK retail and wealth sales, said: “We believe (European) ETFs have the potential to surpass $1trn in assets by 2020, driven by the regulatory drive towards fee-based advice.”
Independent research group ETFGI said ETFs/ETPs listed globally reached a record high of nearly $3.7trn at the end of January.
iShares also found that, in spite of the reflation trade and the relative weakness of bonds over the last two quarters, flows into global bond ETFs continue to be stable.
Global bond ETF flows totalled $16.6bn in January, the most since February 2015 ($18.3bn). iShares said that flows into its investment grade corporates, US Treasuries and EM debt funds had proved particularly strong.
IShares also said that liquidity in bond ETFs was improving, addressing a long-running concern for investors. The development of the bond ETF option market – up 72% year on year – was improving liquidity, particularly in high yield and government bonds.
Equities favoured
Deborah Fuhr, managing partner and co-founder of ETFGI, said: “Investors favoured equities over commodities and fixed income during January as equity markets had a good start to 2017.
“Developed markets outside the US and emerging markets showed strong performance in January up 3.2% and 5.1% respectively while the S&P 500 index was up 1.9% and the DJIA index was up 0.6% in January.”
