US ETP assets plunged 5.7% MoM, but were still 7.2% up YTD in May
ETP assets in the US dropped by $67.3bn to $1.12 trillion last month, still accumulating an increase of 7.2% YTD after the first five months of the year.
Global ETP industry assets pulled back to $1.52 trillion, or 6.1% up YTD.
Risk-off trade spurred loud and clear flight to safety during May
US ETP flows experienced inflows of $5.0bn during May (+$60.1bn, 5.7% of last year’s AUM).
Within long-only ETPs, total flows were +5.9bn in May vs. +$3.7bn in April.
Equity, Fixed Income, and Commodity long-only ETPs experienced cash flows of -$1.7bn, +$8.9bn, and -$1.0bn, respectively.
Concerns over European country solvency and US economic soft patch solidified during May adding momentum and fueling a sizeable market correction. Consequently, the risk-off trade was reflected clearly in ETP flows.
In contrast to April, May flows clearly described the essence of a full-blown risk-off trade. Long-only ETP flows were dominated by robust inflows into high quality fixed income segments such as US Sovereign and Investment Grade debt with a focus on the front end of the yield curve reflecting a desire to move away from both interest rate and credit risk. In addition, Equity ETPs experienced significant outflows across the board, with very few exceptions, among which we found US Defensive sector and Dividend ETPs.
Some of the relevant flow trends of the month were: (1) investment grade debt (+$9.0bn), part of which was (2) Sovereign debt (+$5.1bn), and (3) emerging market equities (-$3.5bn).
New Launch Calendar: moving away from equity-only strategies
There were 6 new ETPs and 2 new ETNs listed during the previous month. All of the products were listed in the NYSE Arca. Out of the 8 new launches 6 seek passive and 2 seek active return objectives.
Last month additions extended the offering in the Fixed Income, Multi Asset strategy, and Alternative space (See figure 20 for more details).
Floor activity rose by 22% driven by higher volatility
Total monthly turnover increased by 22% to $1.46 trillion vs. $1.19 trillion in the previous month.
US ETP trading made up 29.2% of all US cash equity trading in May, down from both its recent peak of 37.5% last August and its 3-year monthly average of 30.0%.
The largest increase was on Equity ETP turnover, which rose by $225bn or 21% to $1.29 trillion, followed by Fixed Income products turnover which grew by $18.6bn, totaling $81bn for the month of May. Meanwhile, Commodity ETP turnover rose by $15.4bn to $71.6bn last month.