Fixed Income, Equity Flows Soar in May: iShares

Fixed Income, Equity Flows Soar in May: iShares

So-called rate and high yield funds hit their highest monthly level this year.

ETF.com
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Contributing Editor
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Reviewed by: etf.com Staff
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Edited by: Ron Day

Net flows to fixed income and equity exchange traded funds soared globally in May with inflows to the former reaching their highest monthly level this year, according to a report by BlackRock Inc.'s iShares unit, the world's biggest manager of ETFs.

So called rates and high yield funds generated $12.4 billion and $5.4 billion in inflows, respectively, for the month. Buoyed by strong U.S. demand, equity flows hit nearly $70 billion, a nearly 71% increase over April's $41 billion in inflows.

"In May, we saw a barbell approach in fixed income, with the highest inflow month of the year for both rates and high yield ETPs," Karim Chedid, head of investment strategy for iShares EMEA at BlackRock, said in a statement. "Meanwhile, equity investments also surged, particularly in US equities, which captured the majority of flows."

iShares data reflects investors' accelerating demand for ETFs in these categories. Rate and high yield funds have generated more than $25 billion in assets this quarter, already more than the roughly $24 billion such products received in Q1, the report found. The findings also dovetail with etf.com data showing U.S. markets' surging interest in ETFs last month, part of a wider rally in risk-on assets. ETFs generated $87 billion in May, nearly triple the previous month according to etf.com. 

Those gains came as the S&P jumped 5% to breach 5,300 for the first time. 

Read More: ETFs Pulled in $87B in May, Almost Triple April's Total

The report noted that investors had returned to products with holdings focused on short-term exposures. These ETFs received $4.2 billion in inflows in May, which followed a strong $3.1 billion in inflows the month prior. This totals reverse the trend from November through March when these funds suffered $15.2 billion in outflows. 

Interest in Bond Proxy Funds Rises

iShares also noted rising interest in in Japanese and European equities, and in bond proxies such as utilities, the latter of which generated $854 million in inflows, their highest monthly level since September 2022. The report attributed this latter spike to the "prospect of the start of further developed market central bank rate cuts."

"Among sectors, industrials and financials took the lead, emphasizing a cyclical preference, yet the prospect of the start of further DM central bank rate cuts has also seen a pickup in interest in bond proxies like utilities," Chedid noted. "International interest in Japanese and European stocks remained pronounced."

Source: etf.com fund flows tool

Tech ETFs retrenched slightly during the month with outflows of $2.4 billion, the first monthy outflows since June 2023's $4.4 billion. But the report noted that "the sector remains a high-conviction call for us, and recent outflows barely make a dent in the $54.7 billion added in the past 10 months."

James Rubin is a contributing editor for etf.com, where he produces the Morning Exchange and Weekly Exchange newsletters. A longtime financial writer, editor and book author, he formerly held positions as a news and markets editor for the Americas at CoinDesk, where he focussed on cryptocurrencies. 

He provided editorial guidance for a Wall Street Journal best-selling book on Bitcoin and oversaw a startup newsroom focused on digital financial assets. He has edited for TheStreet and Unchained, where he wrote daily news stories about the trial of fallen crypto entrepreneur Sam Bankman-Fried. His writing has also appeared in The Hollywood Reporter, Forbes.com, AdWeek, Bankrate, The Financial Brand and The Wall Street Journal. He has also written for Forbes Insights and the Economist Intelligence Unit, including papers presented at World Economic Forums in Davos and Mumbai. 

James is the co-author of The Urban Cyclist’s Survival Guide (Triumph Books) and has been interviewed about bike safety on a number of NPR affiliates. In a prior career, Rubin was a world-ranked tennis player, once competing in Wimbledon’s qualifying rounds. He speaks fluent German and is a graduate of the Columbia University Graduate School of Journalism and received his BA at Columbia University.