Monthly ETF Flows
Cinthia Murphy
November 20, 2014

With its decision to hold off on tapering QE, the Fed unleashed risk-on sentiment in September.

In the past month, as well as in the past quarter, investors have upped their appetite for risk, piling into U.S. and international equities ETFs, as well as into shorter-duration U.S. bond funds. The inflows come amid a U.S. economic recovery that seems to be chugging along, but just slowly enough to keep the Federal Reserve's hands in it.

In all, $33 billion in net new assets found their way into U.S.-listed ETFs in September, the bulk of which landed into U.S. and international equities ETFs. Funds like the SPDR S&P 500 (SPY | A-99) shined, with net inflows of $6.7 billion, followed by the iShares MSCI Emerging Markets ETF (EEM | B-96), which attracted $4.45 billion in net inflows.

On a quarterly basis, the picture is very similar. A total of $56.4 billion flowed into U.S.-listed ETFs in the third quarter, with the lion's share of flows going toward U.S. and international equities funds. Those two asset classes raked in a combined $53 billion in assets in the period, and funds like SPY and EEM were again leaders in quarterly creations. Total U.S.-listed ETF assets ended the quarter at $1.565 trillion, up 3.6 percent from the previous quarter.

The latest round of flows data put the ETF market on track to almost match last year's asset-gathering record of $188 billion in net inflows during the 12 months ended December. So far this year, ETFs have already attracted about $134 billion in fresh investor dollars.

In many ways, investor appetite for riskier fare following the Fed's renewed commitment to its massive bond-purchasing program for the time being makes sense. In a meeting on Sept. 18, the Fed didn't deliver the much-anticipated announcement detailing the tapering of so-called quantitative easing now in its fifth year.

Instead, the Fed said it would continue to feed easy money into the slowly growing economy until it felt that U.S. growth was vibrant enough to stand on its own.

That decision elicited an entire new wave of demand for U.S. equities ETFs—which, as an asset class, gathered more than $14.7 billion in September—and for international equities, particularly emerging market exposure, which had inflows of $14.1 billion during the month of September.

It also brought on renewed appetite for shorter-duration U.S. debt funds as investors continued to reposition their duration exposure in anticipation of higher rates down the road. The longer-dated the debt, the more sensitive it is to interest-rate fluctuations.

Some $4.4 billion found its way into U.S. debt ETFs last month, with like the iShares 3-7 Year Treasury Bond ETF (IEI | A-77) and the ProShares Ultra 7-10 Year Treasury ETF (UST), particularly in demand. IEI and UST each raked in $2.8 billion and $789 million, respectively, in September. Both funds were among the month's top 10 creations.

IEI was also one of the most popular ETFs in the third quarter, attracting nearly $3 billion in the three-month period.

On the flip side of that were longer-dated funds like the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD | B-64), which has an average duration of just under 12 years, and the iShares U.S. Preferred Stock (PFF | B).

LQD lost $478 million and PFF lost $462 million in assets in September. Both funds were also among the quarter's largest redemptions, bleeding $2.27 billion and $1.30 billion in the quarter, respectively.

Beyond longer-dated debt, the redemptions side of the flows story last month and last quarter was largely a tale about commodities, gold in particular.

The asset class bled $1.67 billion in the third quarter, largely because of massive redemptions in the SPDR Gold Trust (GLD | A-100), which bled $2.55 billion in assets in the period. GLD was, in fact, the least popular ETF in the third quarter.

The fund, which ended 2012 with more than $70 billion in assets, ended September with $38.62 billion.

September Flows By Asset Class

 Net Flows ($, mm)AUM ($, mm)% of AUM
U.S. Equity14,762.22813,540.781.81%
International Equity14,181.93374,535.843.79%
U.S. Fixed Income4,406.25228,850.081.93%
International Fixed Income47.9825,660.520.19%
Commodities- 171.5875,347.80-0.23%
Leveraged- 448.3817,378.46-2.58%
Inverse- 239.5420,611.78-1.16%
Asset Allocation10.393,681.490.28%


Q3 Flows By Asset Class

 Net Flows ($, mm)AUM ($, mm)% of AUM
U.S. Equity31,252.43813,540.783.84%
International Equity22,576.15374,532.986.03%
U.S. Fixed Income1,973.31228,850.080.86%
International Fixed Income- 260.2225,660.52-1.01%
Commodities- 1,669.4575,347.80-2.22%
Currency- 79.022,287.15-3.46%
Asset Allocation63.203,681.491.72%


Q3 Top Gainers

TickerNameIssuerQ3 2013 FlowsQ3 2013 AUM ($, M)Q3 2013 Turnover
SPYSPDR S&P 500SSgA6,517.84145,766.161,182,888.52
EEMiShares MSCI Emerging MarketsBlackRock4,616.9341,441.63174,730.21
IWMiShares Russell 2000BlackRock3,861.3427,918.63215,719.55
VGKVanguard FTSE EuropeVanguard3,832.9110,287.1111,386.34
EZUiShares MSCI EMUBlackRock2,999.245,307.709,093.27
IEIiShares 3-7 Year Treasury BondBlackRock2,996.375,384.8311,363.83
VOOVanguard S&P 500Vanguard1,661.8511,700.308,667.21
VEAVanguard FTSE Developed MarketsVanguard1,614.7616,307.558,287.36
GDXMarket Vectors Gold MinersVan Eck1,565.387,456.0871,294.58
VTIVanguard Total Stock MarketVanguard1,378.0133,956.6912,069.07


Q3 Top Losers

TickerNameIssuerQ3 2013 FlowsQ3 2013 AUM ($, M)Q3 2013 Turnover
GLDSPDR GoldSSgA-2,554.9838,623.5377,640.05
LQDiShares iBoxx $ Investment Grade Corporate BondBlackRock-2,274.5117,189.9216,144.04
TIPiShares TIPS BondBlackRock-1,949.6314,108.715,930.28
USMViShares MSCI USA Minimum VolatilityBlackRock-1,627.672,029.742,874.16
XLPConsumer Staples Select SPDRSSgA-1,617.415,271.0619,608.60
SHViShares Short Treasury BondBlackRock-1,411.083,406.736,364.74
DIASPDR Dow Jones Industrial Average TrustSSgA-1,403.9611,359.0957,797.57
PFFiShares U.S. Preferred StockBlackRock-1,308.169,345.955,423.09
SSOProShares Ultra S&P 500ProShares-1,305.211,394.7530,614.82
TLTiShares 20+ Year Treasury BondBlackRock-982.523,086.1857,327.71





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