ETFs With Largest Outflows Of The Year

June 09, 2017

As record amounts of money have come into U.S.-listed exchange-traded funds this year, products of all stripes have seen interest from investors. But even in a year in which $200 billion has rushed into the space in only five months, it's not hard to find at least a few ETFs that have fallen out of favor with investors.

The SPDR S&P 500 ETF Trust (SPY)―the world's largest and most liquid ETF―is one of those. Its redemptions of $6.8 billion in the year-to-date period through May 31 were enough to put it at the No. 1 spot on the outflows list. SPY targets the same index as the iShares Core S&P 500 ETF (IVV) and the Vanguard S&P 500 ETF (VOO), but those funds saw a combined $21.6 billion worth of inflows in the same period that SPY lost billions.

That suggests that even among the cheapest ETFs, investors may be gravitating to the lowest-cost options. SPY's 0.09% expense ratio is low, however, IVV and VOO―both with expense ratios of 0.04%―are even cheaper.

SPY is also known to be popular among traders, while IVV and VOO are more popular among investors. That could mean that short-term traders are less enthusiastic than long-term investors about U.S. stocks after the recent surge in markets.

Cheap, But Not The Cheapest

Another pair of cheap-but-not-the-cheapest ETFs to see large outflows this year is the iShares Russell 2000 ETF (IWM), with an expense ratio of 0.20%, and the SPDR S&P Midcap 400 ETF Trust (MDY), with an expense ratio of 0.25%. IWM had outflows of $3.8 billion, while MDY had outflows of $1.1 billion through the first five months of the year.

The two funds target the broad market of U.S. small-caps and midcaps, respectively, but they're relatively expensive compared with other ETFs that target the same areas.

Aside from that, small and midcap U.S. stocks have underperformed their large-cap counterparts this year, which may also help explain the outflows.

 

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