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IAI » Alternative Investments, ETFs » Blackrock, gold continues to attract inflows as investors look to hedge the potential effects of global monetary easing programs

Blackrock, gold continues to attract inflows as investors look to hedge the potential effects of global monetary easing programs

According to the latest “ETF Landscape” report from the BlackRockInvestment Institute, fixed income ETPs have seen a surge of interest so far this year, as investors areincreasingly choosing an indexed approach to fixed income investing.During November, ETP investors also displayed a continued preference for gold, which is known to be asafe haven asset. However announcements concerning a globally coordinated central bank liquidityoperation brought attention back to risk assets at the end of the month.The report shows that the global ETP marketplace had assets under management of $1.543 trillion as atthe end of November 2011, an increase of $61bn or 4.1% on a year to date basis. The total number ofETPs increased slightly to 4,200 from 4,152 at the end of October.The global exchange traded products industry experienced outflows of $0.6bn in November comparedwith October figures. The European debt crisis, as well as the failure of U.S. legislators to devise a longtermdeficit reduction proposal, has prompted many investors to adopt a ‘wait and see’ approach and tofocus on re-allocating assets rather than committing new money.Fixed income ETPs, the next phase of the ETF revolution?Fixed income ETPs have gathered $43.6bn, or 31.6%, of all assets flowing into the ETP industry so farthis year, as investors are increasingly choosing ETPs to access global fixed income markets. Novembersaw a continuation of this trend, with fixed income ETPs gaining $3.7 billion in net new assets.Furthermore, globally ETPs accounted for 33% of all new money that flowed into all bond funds duringthe first three quarters of 2011. In 2009 and 2010 by comparison, ETPs accounted for 11% and 10% ofassets flowing into bond strategies respectively. This gain in market share by ETPs has been driven bythe increased popularity of fixed income indexing, as well as a trend with investors and advisors towardsexercising more control over their fixed income investments through ETPs. By contrast, actively managedbond funds have seen inflows for the first three quarters of 2011 drop to $70 billion from $200 billion inthe first three quarters of 2010.“In the current and extended low-yield environment, ETPs are attracting huge interest from fixed incomeinvestors who are eager to maximize yield and manage their costs,” commented Kevin Feldman, Managing Director at BlackRock. “This is a truly revolutionary development, signaling that an indexed approach to fixed income investing is becoming as commonplace and as valued as an indexed approachis in the equities space.”“In turn, the number of fixed income ETPs on offer has mushroomed from 122 in 2007 to 591 today, withmore than 110 launched this year alone, and this growth in product range is likely to continue. Providerswill be looking at ways they can offer both broad and niche exposures to global bond markets, and thiswill allow investors to implement customized fixed income asset allocations that mix sectors, geographies,and risk profiles much as they do today for equities.”Gold ETPs attract more new assets than any other categoryCommodity ETPs gathered the most global assets of any category during November 2011, with investorsstrongly favoring gold. Gold ETPs attracted $4.8 billion, making November the sixth consecutive monththat gold has attracted net new assets. Gold ETPs have gathered $12.1 billion so far this year, faroutpacing all other commodity categories, which have collectively seen net outflows of $1.7 billion.“Price volatility in global commodity markets has not dampened the market’s enthusiasm for gold,particularly among both central banks and ETP investors,” commented Mr. Feldman. “Ongoingspeculation about significant future global monetary easing has been favorable for the commodity, asinvestors recognize that central banks have the capability to expand the global money supply rapidly, andgold provides a potential hedge for this scenario.”

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