August—a time when most people ought to be slathering on sunscreen and kicking back at the cottage. Not so in the exchange-traded product (ETP) space where investors were busy pulling money out of exchange-traded funds (ETFs) in record numbers, according to data from BlackRock. Last month, the global ETP industry experienced huge outflows to the tune of $15.0 billion—the worst month for outflows since January 2010 when redemptions hit $17.1 billion.
So, instead of worrying about throwing enough hot dogs and hamburgers on the barbecue, investors were instead wringing their hands over uncertainty about economic growth and the Fed’s next move.
But amid all the outflows, there are signs that ETFs continue to morph into a staple in the market landscape, particularly in maturing markets where a growing number of investors are looking for places to invest their money.
Last week came news that ETFs continue to strengthen their foothold in markets such as Latin America—for example, Brazil-based manager Itau Asset Management has launched the first locally domiciled ETF to be listed in Chile. It’s an important first, according to ETFGI’s Deborah Fuhr—Chilean investors have until now been limited to cross-listed ETFs from the U.S. or Europe. This opened them up to hassles such as foreign exchange risk and tax complications.
The Santiago Stock Exchange is the third largest in Latin America—a cheap option for access in local currency is a huge step forward for that country’s market. It opens a door for Chilean pension funds as well—they’re currently big users of ETFs for exposure to overseas markets. Six pension funds in Chile own $16.2 billion of mostly U.S.-listed ETFs, according to Fuhr.
So while ETFs are clocking some big outflows in some areas of the market, they also continue to improve accessibility in countries where local market access to investing can be a challenge.
Following are a few more notable highlights from the BlackRock data:
- equity ETPs saw redemptions of $9.4 billion, and equity funds with U.S. exposure experienced outflows of $14.5 billion;
- fixed income ETFs took a big hit as investors pulled $5.3 billion;
- emerging market equities had outflows of $3.5 billion, with broad emerging market funds and single-country funds such as Brazil and South Korea taking the biggest hit; and
- investors are feeling good about Europe, however, with pan-European equity ETP flows hitting an all-time high of $4.7 billion as the eurozone economy showed signs of life.