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Market Insights


FLOW & TELL WITH ISHARES | APR 2022

Global

--------------------------------------------------------------------------------

Gargi Pal Chaudhuri May 11, 2022


ETF FLOWS IN APRIL: SENTIMENT WANES

April saw markets grapple with a bleak macroeconomic landscape while investors
struggled to find refuge across asset classes. ETF flows saw investors
positioning in low volatility ETFs as they tried to navigate markets, but not
all flows were a shift in sentiment — some large outflows were likely a relative
value shift towards derivatives. Although earnings season is in full swing,
investors have largely stuck with their sector allocations as the broader market
struggles forward.


THEMES OF THE MONTH

More to flows than meet the eye.

Large outflows from S&P 500 ETFs were likely due to a shift to derivatives, not
a shift in sentiment.

Investors are seeking refuge from volatility.

Investors appear to be positioning defensively in low volatility ETFs as they
navigate an uncertain macroeconomic environment.

Earnings give way to macro.

Sector sentiment has broadly stayed the same as the macroeconomic narrative
weighs on the broader market.

APRIL ETF FLOWSBETA BY ANOTHER NAMEHIGHS AND LOWS OF VOLATILITYSECTORS AND
EARNINGS


APRIL ETF FLOWS


APRIL ETF HEAT MAP

April ETF flows compared with index performance

Source: BlackRock, Bloomberg, chart by iShares Investment Strategy. As of May
01, 2022. Flows normalized by AUM as of March 31, 2022. Index performance is for
illustrative purposes only. Index performance does not reflect any management
fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest
directly in an index. Past performance does not guarantee future results. Index
performance is measured by the following indexes: Communication Services: S&P
500 Communication Services GISC Level 1 Index; Consumer Discretionary: S&P 500
Consumer Discretionary GICS Level 1 Index; Growth: Russell 3000 Growth Index;
Financials: S&P 500 Financials GICS Level 1 Index; Industrials: S&P 500
Industrials GICS Level 1 Index; Value: Russell 3000 Value Index; Utilities: S&P
500 Utilities GICS Level 1 Index; Health Care: S&P 500 Health Care GICS Level 1
Index; U.S. Treasury: ICE BofA 10-Year U.S. Treasury Index; HY Credit: iBoxx USD
High Yield Index; Gold: ICE LBMA Gold Index; Consumer Staples: S&P 500 Consumer
Staples GICS Level 1 Index; Commodities: S&P GSCI Index; Oil & Gas: S&P GSCI
Crude Oil CME Index. Coloring is based on quadrants: quadrant I: green; quadrant
II: yellow; quadrant III: pink; quadrant IV: purple.

--------------------------------------------------------------------------------


BETA BY ANOTHER NAME

Although April saw markets struggle to perform, ETF flows were not quite as
negative as headline numbers suggest.1 Over the course of the month, IVV
(iShares Core S&P 500 ETF), SPY (SPDR S&P 500 ETF), and VOO (Vanguard S&P 500
ETF) collectively saw over $33 billion in outflows.2 Unusually, the outflows
were not accompanied by large exchange volumes.

Flows of this size are typically tied to the derivatives markets. When other
types of financial instruments that track broad market indexes (e.g., futures
and swaps) trade at a premium, institutional investors often switch into ETFs as
a lower cost alternative. When this relationship reverses, as we’ve seen
recently amid low demand for equity exposure, investors may redeem ETFs to take
advantage of discounts in the derivatives market. This leads to both sizable
inflows and outflows, depending on the relative value proposition of the current
market environment. It’s important to keep in mind, however, that these outflows
may not represent investor selling or a shift in sentiment — just a shift in the
way they get exposure to the underlying index.

More than meets the eye



Source: BlackRock, Bloomberg, chart by iShares Investment Strategy. As of May
01, 2022. “IVV” is the iShares Core S&P 500 ETF, “SPY” is the SPDR S&P 500 ETF,
“VOO” is the Vanguard S&P 500 ETF.

--------------------------------------------------------------------------------


FEATURED FUNDS

Equity

iShares Core S&P 500 ETF

IVV

Add To Compare
View

Equity

iShares Core MSCI EAFE ETF

IEFA

Add To Compare
View

Equity

iShares MSCI ACWI ETF

ACWI

Add To Compare
View


LOW CONVICTION LEADS TO LOW VOLATILITY INFLOWS

April was the third worst month for the S&P 500 over the last decade, driven
lower by prospects of tighter monetary policy, deteriorating economic growth,
and geopolitical uncertainty.3 As a result, some investors have turned defensive
in their positioning, looking for ways to protect their portfolios against the
risk of continued volatility and downturns. Low volatility ETFs subsequently saw
$1.2 billion in inflows in April — the largest month of inflows since February
2020.4 

Low volatility indexes are designed to identify stocks with lower volatility
than their peers and low correlations to other equities, therefore dampening
large price swings and seeking to mitigate risk during market downturns. Given
the waning macroeconomic environment — particularly rising rates that are
generally less supportive to risk assets — investors may be using low volatility
ETFs to refocus on risk management. By incorporating low volatility strategies
into a portfolio, an investor can help position to mitigate losses during an
equity sell-off, while also ensuring they stay invested in the market. For
instance, during April’s dismal market performance, the minimum volatility index
used as a benchmark index for ETFs such as the iShares MSCI USA Min Vol Factor
ETF (USMV) fell less than the broader index.5

Positioning in low volatility



Source: BlackRock, Bloomberg, chart by iShares Investment Strategy. As of May
01, 2022. ETF groupings determined by BlackRock, Markit.

--------------------------------------------------------------------------------


FEATURED FUNDS

Equity

iShares MSCI USA Min Vol Factor ETF

USMV

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View

Equity

iShares MSCI EAFE Min Vol Factor ETF

EFAV

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View

Equity

iShares MSCI Global Min Vol Factor ETF

ACWV

Add To Compare
View


SECTORS AND EARNINGS

Earnings season is in full swing, with over half of the S&P 500 having reporting
by the end of April.6 Pervasive uncertainty in the market has weighed
significantly on earnings season, despite much of the data coming in line with
historical averages. Companies that have beat on earnings have struggled as
broad indexes move lower, while forward guidance plays an increasingly
significant role in investor sentiment.

Most of the of sector flow trends we saw prior to earnings season in Q1 have
continued: Traditionally defensive sectors (e.g., health care and utilities)
gathered assets, while consumer discretionary and communication services ETFs
posted outflows.7 Notably, the financial sector saw a dramatic reversal in flows
from the first quarter to April, shedding nearly $7.0 billion in assets over the
course of the month.8 Expectations forecasted negative earnings growth in the
sector: A drawdown in investment banking activity and tightening financial
conditions was only exacerbated by base effects, prompting some investors to
move away from the sector.

Sector trends, reaffirmed



Source: BlackRock, Bloomberg, chart by iShares Investment Strategy. As of May
01, 2022. ETF groupings determine by BlackRock, Markit.

--------------------------------------------------------------------------------


FEATURED FUNDS

Equity

iShares U.S. Healthcare ETF

IYH

Add To Compare
View

Equity

iShares U.S. Utilities ETF

IDU

Add To Compare
View

Equity

iShares U.S. Consumer Staples ETF

IYK

Add To Compare
View








Gargi Pal Chaudhuri

Head of iShares Investment Strategy Americas at BlackRock

Read more

Kristy Akullian

Investment Strategist

Contributor

Nick Morales

Investment Strategist

Contributor


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Investment Strategies

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GET STARTED

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GO FURTHER

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 * Access commodities with ETPs

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 * Match your investment goals to sustainable ETFs

 * ADVISORS: REDESIGN PORTFOLIOS
 * INSTITUTIONS: EXPLORE FIXED INCOME ETFs

Market Insights

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 * OUTLOOK & INSIGHTS

MARKET INSIGHTS

 * Maneuvering through the Fed’s hiking cycle
 * Staying in the zone with factor ETFs
 * Three types of ETFs that can help with rising rates
 * Hedging inflation with bond ETFs

ETF FLOWS

 * Last month's ETF flows
 * View all ETF flows

 * ADVISORS: EXPLORE INSIGHTS BY BLACKROCK
 * GET OUR INSIGHTS DELIVERED TO YOUR INBOX

Education

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 * What is index investing?
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 * ADVISORS: EARN CE CREDITS

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© 2022 BlackRock, Inc. All rights reserved.

1 “Beta” is a measure of the tendency of securities to move with the market as a
whole. In this context, beta is in reference to an investor seeking to match the
returns of an index through financial instruments. ETFs are beta vehicles in
that they seek to track an index (less management fees and in lieu of trading
costs), similar to other financial instruments such as futures and swaps.

2 BlackRock, Bloomberg. As of May 01, 2022.

3 BlackRock, Bloomberg. As of May 01, 2022. Past performance does not guarantee
future results. S&P 500 index represented by the S&P 500 Index (SPX).

4BlackRock, Bloomberg. As of May 01, 2022. ETF groupings determined by
BlackRock, Markit.

5 BlackRock, Bloomberg. As of May 01, 2022. Past performance does not guarantee
future results. “Broader index” is represented by the S&P 500 Index (SPX);
“minimum volatility” by the MSCI USA Minimum Volatility Index (M00IWO).

6 BlackRock, Bloomberg. As of May 01, 2022.

7 BlackRock, Bloomberg. As of May 01, 2022. ETF groupings determined by
BlackRock, Markit.

8 BlackRock, Bloomberg. As of May 01, 2022. ETF groupings determined by
BlackRock, Markit.

--------------------------------------------------------------------------------

Carefully consider the Funds' investment objectives, risk factors, and charges
and expenses before investing. This and other information can be found in the
Funds' prospectuses or, if available, the summary prospectuses, which may be
obtained by visiting the iShares Fund and BlackRock Fund prospectus pages. Read
the prospectus carefully before investing.

Investing involves risk, including possible loss of principal.

International investing involves risks, including risks related to foreign
currency, limited liquidity, less government regulation and the possibility of
substantial volatility due to adverse political, economic or other developments.
These risks often are heightened for investments in emerging/ developing markets
or in concentrations of single countries.

Diversification and asset allocation may not protect against market risk or loss
of principal.

Fixed income risks include interest-rate and credit risk. Typically, when
interest rates rise, there is a corresponding decline in bond values. Credit
risk refers to the possibility that the bond issuer will not be able to make
principal and interest payments.

Non-investment-grade debt securities (high-yield/junk bonds) may be subject to
greater market fluctuations, risk of default or loss of income and principal
than higher-rated securities.

An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency and its return and yield
will fluctuate with market conditions.

Funds that concentrate investments in specific industries, sectors, markets or
asset classes may underperform or be more volatile than other industries,
sectors, markets or asset classes and than the general securities market.

Technology companies may be subject to severe competition and product
obsolescence.

TIPS can provide investors a hedge against inflation, as the inflation
adjustment feature helps preserve the purchasing power of the investment.
Because of this inflation adjustment feature, inflation protected bonds
typically have lower yields than conventional fixed rate bonds and will likely
decline in price during periods of deflation, which could result in losses.
Government backing applies only to government issued securities, and does not
apply to the funds.

The iShares Minimum Volatility Funds may experience more than minimum volatility
as there is no guarantee that the underlying index's strategy of seeking to
lower volatility will be successful.

There can be no assurance that performance will be enhanced or risk will be
reduced for funds that seek to provide exposure to certain quantitative
investment characteristics ("factors"). Exposure to such investment factors may
detract from performance in some market environments, perhaps for extended
periods. In such circumstances, a fund may seek to maintain exposure to the
targeted investment factors and not adjust to target different factors, which
could result in losses.

Commodities' prices may be highly volatile. Prices may be affected by various
economic, financial, social and political factors, which may be unpredictable
and may have a significant impact on the prices of commodities.

There is no guarantee that dividends will be paid.

There can be no assurance that an active trading market for shares of an ETF
will develop or be maintained.

This material represents an assessment of the market environment as of the date
indicated; is subject to change; and is not intended to be a forecast of future
events or a guarantee of future results. This information should not be relied
upon by the reader as research or investment advice regarding the funds or any
issuer or security in particular.

The strategies discussed are strictly for illustrative and educational purposes
and are not a recommendation, offer or solicitation to buy or sell any
securities or to adopt any investment strategy. There is no guarantee that any
strategies discussed will be effective.

The information presented does not take into consideration commissions, tax
implications, or other transactions costs, which may significantly affect the
economic consequences of a given strategy or investment decision.

This material contains general information only and does not take into account
an individual's financial circumstances. This information should not be relied
upon as a primary basis for an investment decision. Rather, an assessment should
be made as to whether the information is appropriate in individual circumstances
and consideration should be given to talking to a financial professional before
making an investment decision.

The information provided is not intended to be tax advice. Investors should be
urged to consult their tax professionals or financial professionals for more
information regarding their specific tax situations.

The Funds are distributed by BlackRock Investments, LLC (together with its
affiliates, "BlackRock").

The iShares Funds are not sponsored, endorsed, issued, sold or promoted by
Bloomberg, BlackRock Index Services, LLC, Cohen & Steers, European Public Real
Estate Association (“EPRA®”), FTSE International Limited (“FTSE”), ICE Data
Indices, LLC, NSE Indices Ltd, JPMorgan, JPX Group, London Stock Exchange Group
(“LSEG”), MSCI Inc., Markit Indices Limited, Morningstar, Inc., Nasdaq, Inc.,
National Association of Real Estate Investment Trusts (“NAREIT”), Nikkei, Inc.,
Russell or S&P Dow Jones Indices LLC. None of these companies make any
representation regarding the advisability of investing in the Funds. With the
exception of BlackRock Index Services, LLC, which is an affiliate, BlackRock
Investments, LLC is not affiliated with the companies listed above.

Neither FTSE, LSEG, nor NAREIT makes any warranty regarding the FTSE Nareit
Equity REITS Index, FTSE Nareit All Residential Capped Index or FTSE Nareit All
Mortgage Capped Index. Neither FTSE, EPRA, LSEG, nor NAREIT makes any warranty
regarding the FTSE EPRA Nareit Developed ex-U.S. Index or FTSE EPRA Nareit
Global REITs Index. “FTSE®” is a trademark of London Stock Exchange Group
companies and is used by FTSE under license.

© 2022 BlackRock, Inc. All rights reserved. BLACKROCK, BLACKROCK SOLUTIONS,
BUILD ON BLACKROCK, ALADDIN, iSHARES, iBONDS, FACTORSELECT, iTHINKING, iSHARES
CONNECT, FUND FRENZY, LIFEPATH, SO WHAT DO I DO WITH MY MONEY, INVESTING FOR A
NEW WORLD, BUILT FOR THESE TIMES, the iShares Core Graphic, CoRI and the CoRI
logo are trademarks of BlackRock, Inc., or its subsidiaries in the United States
and elsewhere. All other marks are the property of their respective owners.

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