Int’l Equity ETFs Fuel Record Year

June 06, 2017

To say that inflows into U.S.-listed ETFs are at all-time highs is an understatement. Through the first five months of 2017 inflows are shattering all records―with no end in sight to the stampede into exchange-traded funds.

Ever since the election, ETF investors have become downright euphoric about stocks. That hasn't changed with the recent controversies surrounding the Trump administration and the slow progress in getting the president's pro-growth agenda through Congress.

As sentiment on the U.S. economy and stock market has slightly cooled (the market is still climbing to new highs on a near-daily basis as of this writing, just at a slower pace), investors merely shifted their attention and money to international stocks.

More telling is that 2017 inflows into international equity ETFs surpassed those of U.S. equity ETFs in May, according to the latest data from FactSet. By the end of the month, year-to-date inflows into the former were $74.6 billion, compared to $68.5 billion for the latter.

Fixed Income Getting Love

Even fixed-income ETFs have been getting love from investors. In the first five months of the year, $48.5 billion flowed into U.S. fixed-income funds, while $8.4 billion flowed into international fixed-income funds.

Contrary to what many had believed at the start of the year, bond prices have rallied so far in 2017, with the U.S. 10-year Treasury yield falling from 2.45% to less than 2.2% by the end of May (bond prices and yields move inversely). Corporate bonds have also done well, as an improving economic outlook diminishes the chances of default.

Year-to-date, every major ETF segment, with the exception of two, has net inflows. Asset allocation funds and currency funds are the only two to see outflows—$70 million and $157 million, respectively.

Putting that all together, U.S.-listed ETFs have inflows of a whopping $203.8 billion through the end of May, pushing total assets under management in the space to $2.93 trillion. If that pace keeps up, inflows for 2017 as a whole may come in just shy of $500 billion, blowing past last year's annual record of $282 billion.

 

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