2013 Lipper Awards
The hunt for income goes off the beaten path
BlackRock's Dodd Kittsley on the booming investor interest in exchange-traded-products that throw off sizable dividends.
A lot of folks are talking about the great rotation and we have a little bit of a different view on that at least from ETF flows that we've observed. There's been a rotation but it's rather been within fixed income. We received strong flows in the short, ultra short and floating rate products with $5.7 billion year to date going into those categories where we've seen outflows of $1.5 billion in intermediate term or longer term in broad markets. So the flows [unk] have been positive. Almost $8 billion in fixed income and certainly off of their record levels that we saw back in 2012. But certainly we're not seeing a mass exit as or flaws out of ETP fixed income assets. We've seen a real difference in flows on the equity side from January until, you know, now and February and March. There's been a complete different type of dynamic going on. The flaws have been strong. Year to date were $60 billion in the majority that is being driven by the equity side of the equation. But really since the end of January, the majority has gone into the developed markets. Majority of that has been in the US equity market but we've also seen strong growth in Japan. We've seen strong growth in Europe as well, but there's been a clear preference for exposure in diversified exposure to develop market equities. Now we've certainly seen a moderation in emerging market equities on the other side of the coin where that was on fire in December and January. I mean, January alone took $11 billion in emerging market equities. We've seen those flows actually turned modestly negative in February and month to date here in March. So a pause I think an emerging market flows in a real pick up as economic numbers come in on the US equity exposure. We've seen a bit of rotation in terms of interest within US equities as well. Sectors have been extremely popular. We've seen about $10 billion flow in there and then we've also seen some strategy-based exposures as well that have really picked up particularly equity income or dividend income-focused products. We've seen about $5 billion flow in year to date and it's been a significant pick up from the pause December but a resumption of a secular trend where there's $14.5 billion last year and $18 billion a year before. So the hunt for income is gone far beyond fixed income and investors have been creative with exchange traded products to find that exposure. Volatility-based product has been a great story. We've seen a lot of products on the market last year and we've seen flows pick up significantly. So, $3 billion has flowed into minimum volatility-based exchanged traded products into 2013. We saw $5 billion last year, so investors, while they're hasn't been an uptick in volatility per say when looking at the vix index. Many investors are preparing their portfolios for a day when vix rises.
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