IInvestors are starting to sit on the sidelines as investments in exchange-traded funds slip to their lowest level since the Covid-19 pandemic first hit.
According to data from BlackRock, global ETF net inflows fell to $27.4 billion in April from $117.4 billion in March, marking the lowest monthly figure since March 2020, the Financial Times reports. .
Flows into equity-linked ETFs slowed to almost a halt with just $2.8 billion in net inflows in April, compared to $76.2 billion in March. The slowdown in equity ETF flows followed the spike in global equity volatility, with the FTSE All-World Index falling 8.1% in April, taking the benchmark’s losses to 13.2% since the start of the year against a backdrop of growing concerns about stagflation, or slowing economic growth associated with high inflationary pressures.
“We have seen a significant decline in equity flows,” Karim Chedid, head of investment strategy for BlackRock’s iShares ETF arm in EMEA, told FT.
Nonetheless, he argued that while there was an element of risk reduction, “I wouldn’t say it’s a race for money by any stretch of the imagination”.
In the United States, ETF investors withdrew $25.6 billion net from equity-linked ETFs focused on Wall Street. On the other hand, there were much weaker outflows from European equities, and there were even net flows into large offers from developed markets, emerging markets and Japan.
Among April’s most hated ETF games, the SPDR S&P 500 ETF (SPY)the iShares Core S&P 500 ETF (IVV), and the Vanguard S&P 500 (VOO) all suffered between $10 billion and $12 billion in outflows, marking a complete reversal after all three were in the top five for inflows in March. VOO’s $10.2 billion outflow was also the largest monthly outflow of any Vanguard ETF on record, according to Morningstar data.
Chedid said these capital outflows were largely attributed to technical factors, with futures trading at a discount to major equity indices, “so some institutional clients have switched over the past month from US equity ETFs. futures contracts”.
“Flows of this size are usually tied to derivatives markets,” Chedid added. “It’s important to keep in mind, however, that these exits do not represent a sell-off by investors or a change in sentiment – just a change in how they are exposed to the underlying index.”
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