Flow & Tell with iShares | April 2024 ETF Flows

Geopolitical tensions took center stage in April, though a string of stubborn inflation reports also found some airtime. On the back of both headlines, investors flocked to broad-based commodity funds in a crowded long, hedging against inflation and geopolitical shocks alike. The 20 largest broad-commodity ETFs netted $970mn in April, the largest inflows in two years (a high bar to clear, given oil prices ratcheted up to 13-year highs in March 2022).¹

Under the hood, however, adoption of broad-based commodities did not translate to specific exposures. Despite gaining 12% on the year, gold ETF flows remain in negative territory, with April shedding an additional $1mn, the most drastic flows vs. performance spread in the past decade.² Bitcoin ETFs fared a similar fate: spot Bitcoin ETF flows were largely muted relative to behemoth Q1 totals, and volumes sank to half of March’s figures.³

April snapped a five-month winning streak for U.S. equities, ending the month lower 4% in a broad slide with ten of the eleven S&P 500 sectors clocking losses.⁴ Markets entered Q2 pricing in three rate cuts by the end of the year, and forecasts were pared back to under two by month end, with a starting date of September versus July.⁵ This prospect of high-for-even-longer rates weighed on U.S. equities, with pressure even more dramatic in the small cap universe and tech-heavy Nasdaq. Even so, investors weren’t ready to divest just yet — flows were in positive territory, but largely muted.

In a sign of diverging policy playbooks, market pricing for the ECB held steady with a first cut forecasted for June. A dovish ECB should provide a tailwind for European stocks, and flows point to investors adding to that bet — in April, Europe ETFs netted double their YTD monthly average as the euro-wide Stoxx 600 outperformed the SPX.⁶ Broadly, developed markets ex-U.S. captured 30% of all equity ETF flows, the largest percentage since August 2023.

April’s slew of market volatility (inflation, earnings, geopolitics, manufacturing data, rates, etc.) sent investors hunting for diversification and a way to dial down exposure to broad market risk. One fund that has attracted attention is the BlackRock Global Equity Market Neutral Fund (BDMIX), a liquid alternative portfolio that aims to deliver consistent returns without correlation and beta to equity markets at large.⁷

The fund has seen sustained inflows, adding $542 million in assets so far this year, bringing one-year inflows to nearly $900 million.⁸ With questions around stock/bond correlations and increasing dispersion, the flows reflect the broad appeal of diversifiers amid the uncertain, and noisy, market backdrop.

April was the first month in six months where both broad-based equity and fixed income market analogs registered negative returns. In periods where bonds do little by the way of ballast, market neutral strategies centered on low correlation and alpha potential can complement investors core allocations well.