Monthly ETF Flows
By Staff
November 20, 2014

ETF flows turned negative in June—and with a record-setting, Fed-related vengeance.


ETF investors bailed out of just about every asset class in June, fueling what appears to be all-time record monthly outflows from U.S.-listed exchange-traded funds, as skittishness about the prospect of the Federal Reserve normalizing interest rates threw financial markets into disarray and put the prospect of 2013 being a record year of ETF inflows into question.

About $13 billion has spilled out of the ETF market this month through Thursday, June 27, pulling total U.S.-listed ETF assets down by around 5 percent on the month, to $1.437 trillion, according to data compiled by IndexUniverse. The last time the U.S. ETF industry suffered any outflows—period—was in December 2011, when investors yanked a mere $20 million out of the market.

The upheaval in markets that the world of ETFs is reflecting so dutifully began on May 22, when Fed Chairman Ben Bernanke said the U.S. central bank might well begin to "taper" its quantitative easing program this year. Markets saw this as a unsettling sign that the end of the unprecedented era of monetary stimulus was coming into focus, causing investors to reconsider risks they were taking.

The outflows in June have left year-to-date inflows at just shy of $71 billion—less than the $76 billion in the first half of 2012. Last year, inflows ended at a record $188 billion, and many ETF industry sources predicted inflows in 2013 would shatter that record. The unexpectedly large outflows in June have called those predictions into question.

Nowhere did they rush for the exits more dramatically than in international equities, where redemptions totaled almost $9 billion. The most unpopular ETF last month was the iShares MSCI Emerging Markets Index Fund (NYSEArca: EEM), which had outflows of around $4.4 billion.

That said, U.S. and international fixed-income funds together recorded outflows of more than $8 billion, with more than $7 billion of that coming from U.S. bond funds.

While that $8 billion bond ETF outflows figure is less than the $9 billion international equities outflows figure on a nominal basis, the bond figure amounts to more than 3 percent of all assets invested in U.S.-listed bond ETFs, while the $9 billion international equities figure amounts to just 1 percent of all assets invested in U.S.-listed equities.

Translation: The real dislocation in financial markets is definitely emanating from fixed-income markets, where price volatility was creating volatility in ETF flows. Some were so flummoxed by what the Fed's changing posture could mean that they were parking money in cash, some market sources told IndexUniverse.




"I think this is 80 percent the Fed and 20 percent everything else," said Nick Colas, chief market strategist of BNY ConvergEx Group, a Wall Street trading and technology firm. Colas said the "everything else" piece included variables such as rumblings of trouble in China's credit markets as well as social unrest in once-high-flying emerging markets, including Turkey and Brazil.

center behind EEM on the redemptions list was the $19.4 billion iShares iBoxx $ Investment Grade Corporate Bond Fund (NYSEArca: LQD), which suffered outflows of $2.39 billion.

Commodities suffered upward of $2.4 billion in outflows, and gold—the ultimate lightning rod of emotional reactivity in markets—was at the center of that. The SPDR Gold Shares (NYSEArca: GLD), the world's biggest gold bullion ETF, had redemptions of $1.8 billion in the month-to-date period. The huge gold fund, including gold's 25 percent price slide, has lost more than 40 percent of its assets this year.

"Shorten duration, and get into reliable parts of the market like U.S. equities," Colas said, summarizing what he reckoned many investors must be thinking these days.

Many sources who watch the world of ETFs closely are genuinely flat-footed by the outflows in June brought on by the Fed's signaling, and aren't sure what might happen next.

Still, there's a general sense that, over the longer term, the ETF asset-gathering juggernaut will stabilize and again step into high gear.

"I think this may not be the only outflows month in 2013, but the merits of an ETF vs. mutual fund are still there," said Todd Rosenbluth, an analyst at S&P Capital IQ in New York, who focuses closely on ETFs.

Rosenbluth said it seems plausible that when investors return to the markets once the redemption wave recedes, they'll get back in using ETFs—equities or bond ETFs—instead of mutual funds, because ETFs are cheaper and many mutual funds aren't beating, let alone matching, the performance of their benchmarks.

He said S&P Capital IQ was counseling investors to start looking at U.S. consumer cyclicals—precisely the sorts of equities like financials, retail, autos and entertainment that are likely to do well if the economy, as the Fed says, is improving.


Indeed, U.S. equities were the one exception to the outflows story in June, pulling in $4.5 billion in the month so far.

"That was one of the only areas of the ETF market with inflows, but it wasn't enough to offset the rest," ConvergEx's Colas said.



(The following table, with $14 billion in net outflows, reflects month-to-date data through Wednesday, June 26. The total outflows number of around $13 billion in the headline and text above reflects the inclusion of net ETF inflows of almost $1 billion on the following day, Thursday, June 27. Those June 27 inflows trimmed net month-to-date outflows to about $13 billion.)

June 2013 Month-To-Date Total Flows
June 2013 MTD Total FlowsNet Flows ($, mm)AUM ($, mm)% of AUM
U.S. Equity4,496.01738,881.210.61%
International Equity-8,815.11316,970.44-2.78%
U.S. Fixed Income-7,030.02225,206.97-3.12%
International Fixed Income-1,134.6525,557.52-4.44%
Asset Allocation37.653,511.121.07%


June 2013 Month-To-Date Biggest Losers
TickerNameIssuer6/26/13 MTD Flows6/26/13 MTD AUM ($, M)6/26/13 MTD Turnover
EEMiShares MSCI Emerging MarketsBlackRock-4,581.2032,775.6366,115.95
LQDiShares iBoxx $ Investment Grade Corporate BondBlackRock-2,387.0619,406.947,818.57
VWOVanguard FTSE Emerging MarketsVanguard-1,942.2647,704.2720,708.68
GLDSPDR GoldSSgA-1,831.8638,517.7724,615.15
TIPiShares Barclays TIPS BondBlackRock-1,751.4015,921.964,318.61
IEIiShares Barclays 3-7 Year Treasury BondBlackRock-1,515.992,300.212,342.83
JNKSPDR Barclays High Yield BondSSgA-1,277.069,092.168,223.48
SPYSPDR S&P 500SSgA-1,113.17134,450.83525,862.64
USTProShares Ultra 7-10 Year TreasuryProShares-1,113.1323.231,363.06
EWHiShares MSCI Hong KongBlackRock-1,093.672,159.443,139.11


June 2013 Month-To-Date Top Gainers
TickerNameIssuer6/26/13 MTD Flows6/26/13 MTD AUM ($, M)6/26/13 MTD Turnover
EWGiShares MSCI GermanyBlackRock1,177.933,986.882,098.31
UWMProShares Ultra Russell 2000ProShares1,116.971,222.642,248.37
TLTiShares Barclays 20+ Year Treasury BondBlackRock995.424,144.5225,245.35
GDXMarket Vectors Gold MinersVan Eck888.065,121.7711,570.41
IWMiShares Russell 2000BlackRock871.7421,513.2888,393.28
IVViShares Core S&P 500BlackRock837.7342,528.4015,953.94
SHYiShares Barclays 1-3 Year Treasury BondBlackRock674.228,204.002,396.15
SCPBSPDR Barclays Short Term Corporate BondSSgA622.802,797.861,031.41
MINTPIMCO Enhanced Short Maturity StrategyPIMCO603.503,576.721,176.99
SHViShares Barclays Short Treasury BondBlackRock584.234,717.421,733.98


2013 Year-To-Date Total Flows
2013 YTD Total FlowsNet Flows ($, mm)AUM ($, mm)% of AUM
U.S. Equity57,625.07738,881.217.80%
International Equity15,914.59316,970.445.02%
U.S. Fixed Income7,692.16225,206.973.42%
International Fixed Income1,914.9625,557.527.49%
Asset Allocation1,130.153,511.1232.19%


SPY and a host of value-focused U.S. equity ETFs raked in money Thursday, Dec. 18, as the S&P 500 jumped 2.4 percent on the day, helping propel total U.S.-listed ETF assets to $1.977 trillion

A slew of iShares funds, including 'IWM' and 'TLT,' paced BlackRock's issuer-leading inflows on Thursday, Dec. 18, as total U.S.-listed ETF assets jumped to $1.977 trillion.


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