Stock ETFs Gained On Mutual Funds In July

August 13, 2012

Related ETFs

Ticker Fund name
Related ETF Lists
Large Cap ETFs

Equity ETFs are gaining ground on mutual funds, but in the fixed-income space, the story is a little different.


Morningstar reported that $8.5 billion bled out of U.S. equity-focused mutual funds in July, which is not surprising given all the eurozone-related volatility coursing through markets last month. But equities ETFs pulled in $12 billion in July, according to data compiled by IndexUniverse, a tale of two investment vehicles that says a lot about the strengths of ETFs.

The ETF structure’s inherent liquidity benefits and lower costs relative to mutual funds are what's behind investor demand for the exchange-traded funds, Magoon Capital’s CEO Christian Magoon told IndexUniverse in an interview.

From a cost perspective, it makes sense to access stocks through cheaper exchange-traded vehicles, because when the stock market is delivering lower returns in capital appreciation and dividends, expense ratios become more important, Magoon said.

“End-of-the day pricing is a tough pill to swallow when comments from around the world—i.e., Draghi or China—can easily move markets in material and unexpected ways throughout the day,” he added, referring to intraday liquidity issue.  “Investors are less likely to take the chance of a blind buy or sell transition in mutual funds at the end of the day.”

In July, stocks first sold off sharply, then rose at the end of the month as the market focused on the eurozone's evolving debt crisis and grew jittery over its impact on global economic growth. By the end of the month, the Dow Jones industrial average was somehow 1 percent higher, at 13,008.68.

Funds like the SPDR S&P 500 ETF (NYSEArca: SPY) hauled in $2.90 billion in new assets in July alone, pushing its total assets to near $108 billion. SPY, the world’s largest ETF and the first one listed in the United States, was launched in January 1993.

In all, investors poured some $16 billion into ETFs in July—three-quarters of it into U.S. equities—making the haul the second-highest monthly total since the $28 billion that flowed into ETFs in January. Last month’s flows, including the market’s rise, lifted total U.S.-listed ETF assets 2.6 percent to $1.209 trillion.

Bonds Tell A Different Tale

While equity ETFs are valued for their intraday tradability, liquidity and lower costs, those traits aren’t yet enough to offset the “nascent nature” of ETFs that serve up access to fixed income.

In the bond space, investors poured $29 billion into fixed-income mutual funds in July—particularly into those offering high-yield bonds, according to Morningstar, a Chicago-based financial markets data provider.

Fixed-income ETFs meanwhile raked in just $1.5 billion, and only $216 million was tied to domestic debt funds, according to San Francisco-based IndexUniverse.

Bond ETFs are by many measures in their infancy, and it may take a while for them to be as liquid or accessible as equities ETFs, Magoon said.



Interested in China? Use our China ETFs Channel, library, and ETF screener.

Interested in oil? Use our oil ETFs channel, library and ETF screener!


The oil and gas ETF saw net inflows of $135 million on Wednesday, April 27.

The top five issuers all saw net inflows into their exchange-traded products on Wednesday, April 27.


By Drew Voros

With the broad equity ideas all taken, issuers look for thinner slices of exposure.

By David Lichtblau

How funds wash away capital gains through create/redeem process.

By Dave Nadig

End investors are the big winners; brokers—not so much.

By Dave Nadig

ETF industry petitions the SEC for market microstructure changes.


By Adam Patti

After a record-setting year in 2015, investors wonder what 2016 will hold.

By Sprott Asset Management

New fund’s underlying index targets equities sentiment on social media.

By Kristi Kuechler

Avoid taking unrewarded—or unintended—risks.