ETF investors return to risk

Exchange traded fund (ETF) investors returned to riskier assets in October as fears eased on the European debt crisis and US corporations showed positive third quarter earnings, according to BlackRock.

Money flooded back into equity and high yield bond funds during October, according to the BlackRock Investment Institute's latest ETF Landscape report.

BlackRock managing director Kevin Feldman said while flows into exchange traded products (ETPs) suggested a preference for safe haven assets in early October, which was overtaken by a move to equity assets and high yield bonds later in the month. 

"Flows during October demonstrate that the risk-on trade has definitely resumed," he said.

Investors placed US$21.3 billion into equity ETPs during October, particularly in funds and products offering exposure to North American and German equities, according to BlackRock.

Emerging market equity ETPs attracted US$4.1 billion of new assets following two months of heavy outflows, while high yield bonds attracted US$2.4 billion globally during the month. Gold ETPs gathered US$2.0 billion during the month and $7.3 billion year to date, while demand for commodities faltered, the report found.

In Europe, physically-backed products gained market share from synthetic ETPs over the past three months.  

"While the ETP industry had strong asset gathering overall, in Europe, the fortunes of physically-backed and derivative-backed products have diverged over the last three months, with investors showing a preference for funds and products that purchase the underlying assets," Feldman said.