Blackrock sees record inflows to ETPs

Fixed income ETP inflows hit almost $49 billion in first quarter according to world’s biggest asset manager.

Fixed income exchange traded products saw inflows of $43.8 billion in the first three months of 2016 – a record for the asset class – according to BlackRock.

It comes amid ongoing concerns about bond liquidity because ETPs are often correlated with cash bond markets.

Last year, the International Monetary Fund warned of significant macro risk should investors choose to exit funds at the same time.

Bond market liquidity has been reduced as a result of stricter regulation of market making operations and central bank interventions.

Earlier this year, Greenwich Associates warned that ETPs are going to have a growing influence on liquidity trends in the market.

Despite this, investors continue to pile into fixed income ETPs, with $15.5 billion going into the funds in March 2016, $6.8 billion going into European listed fixed income funds.

Ursula Marchioni, chief strategist, iShares EMEA at BlackRock, said: “Global ETP flows broke out after a slow start to the year.

“Fixed income ETP flows reached a new quarterly high, while smart beta funds hit a new monthly record and emerging market equity ETPs had their best month in three years.”

The BlackRock report also showed that smart beta ETP flows – ETPs where underlying indices are rebalanced on metrics other than market cap – hit a new monthly high of $7.8 billion.  Minimum volatility funds posted inflows of $3.2 billion for the month.