Fixed Income ETFs Fuel Record 2017 Inflow

October 02, 2017

Investors continued to add money into exchange-traded funds at a blistering pace in September, encouraged by a record run in the stock market. On net, $28.2 billion flowed into U.S.-listed ETFs during the month, according to the latest data from FactSet. That follows inflows of $29.9 billion for the month of August.

Year-to-date inflows now stand at $332.1 billion, a fresh annual record.

During the month, the S&P 500 hit a new all-time high around 2,519. The widely followed stock index was up 14.2% through the first nine months of 2017.

Meanwhile, the U.S. 10-year Treasury yield, perhaps the most widely followed bond benchmark, leapt to 2.33% by the end of September, up from where it started the month, at 2.12% (bond prices and yields move inversely).

Still, the sell-off in bonds didn't stop investors from putting money into fixed-income ETFs. They garnered the most inflows of any ETF segment during the month―$11.3 billion. That was followed by international equity ETFs, with $9.5 billion worth of inflows; and U.S. equity ETFs, with $5.6 billion.

Other segments to see notable inflows were international fixed-income ETFs, with $689 million; and commodity ETFs, with $2.2 billion.

Unfazed By Hawkish Yellen

One of the most noteworthy ETFs to see interest during September was the iShares 20+ Year Treasury Bond ETF (TLT). Its $2.5 billion worth of inflows catapulted total assets under management for the fund to $9.5 billion, an increase of 26%.

TLT was popular even as interest rates increased on the back of relatively hawkish comments from Federal Reserve Chair Janet Yellen. In a speech at the end of the month, Yellen said it could be risky to move "too gradually" in hiking interest rates.

Markets now imply there is a 70% chance that the Fed raises rates at the December central bank meeting.

Another popular ETF in September, despite falling prices, was the SPDR Gold Trust (GLD). Rising rates and a climbing dollar sent gold prices down $70/oz from their September peaks, but investors still added $2.4 billion to GLD.

Profit-Taking In Inverse VIX, Oil ETFs
Taking a look at the other side of the ledger, the ETF to see the largest outflows was the SPDR S&P 500 ETF Trust (SPY). SPY's outflows of $10.7 billion were well ahead of any other fund.

The ProShares Short VIX Short-Term Futures ETF (SVXY) and the VelocityShares Daily Inverse VIX Short-Term ETN (XIV) were two other losers on the list, with outflows of $583 million and $419 million, respectively.

Both funds rallied hard in September, and are among the top-performing ETFs of 2017, with year-to-date gains of 107%.

Finally, another fund worth mentioning is the United States Oil Fund (USO), another big loser during the month, with outflows of $490 million. Traders took profits in the fund as oil prices briefly hit a five-month high during September.

Contact Sumit Roy at [email protected]

 

Top Gainers (September 2017)

Ticker Name Issuer Net Flows ($,mm) AUM ($M) % of AUM YTD 2017 Net Flows($,M)
IWM iShares Russell 2000 ETF BlackRock 2,458.15 41,153.33 6.35% -553.09
TLT iShares 20+ Year Treasury Bond ETF BlackRock 2,453.29 9,515.84 34.74% 4,054.16
GLD SPDR Gold Trust State Street Global Advisors 2,040.32 35,643.47 6.07% 1,994.87
IEFA iShares Core MSCI EAFE ETF BlackRock 2,009.20 35,740.83 5.96% 16,477.27
VWO Vanguard FTSE Emerging Markets ETF Vanguard 1,560.94 62,002.57 2.58% 8,540.17
VOO Vanguard S&P 500 ETF Vanguard 1,265.42 73,773.19 1.75% 9,953.35
XLF Financial Select Sector SPDR Fund State Street Global Advisors 1,186.63 27,219.60 4.56% 2,455.14
HYG iShares iBoxx $ High Yield Corporate Bond ETF BlackRock 1,172.19 19,332.49 6.45% 77.68
VEA Vanguard FTSE Developed Markets ETF Vanguard 988.17 62,347.82 1.61% 14,165.68
IJR iShares Core S&P Small Cap ETF BlackRock 902.35 33,211.14 2.79% 4,996.86

 

Top Gainers (Year-to-Date)

Ticker Name Issuer Net Flows ($,mm) AUM ($M) % of AUM September 2017 Net Flows($,M)
IVV iShares Core S&P 500 ETF BlackRock 23,306.80 125,844.80 22.73% 152.97
IEFA iShares Core MSCI EAFE ETF BlackRock 16,477.27 35,740.83 85.54% 2,009.20
VEA Vanguard FTSE Developed Markets ETF Vanguard 14,165.68 62,347.82 29.40% 988.17
IEMG iShares Core MSCI Emerging Markets ETF BlackRock 13,403.30 37,215.54 56.29% 752.76
VOO Vanguard S&P 500 ETF Vanguard 9,953.35 73,773.19 15.60% 1,265.42
LQD iShares iBoxx $ Investment Grade Corporate Bond ETF BlackRock 9,505.06 37,485.21 33.97% -835.74
EFA iShares MSCI EAFE ETF BlackRock 9,481.25 79,767.07 13.49% 0.00
VWO Vanguard FTSE Emerging Markets ETF Vanguard 8,540.17 62,002.57 15.97% 1,560.94
AGG iShares Core U.S. Aggregate Bond ETF BlackRock 8,145.51 50,304.97 19.32% 506.44
VCIT Vanguard Intermediate-Term Corporate Bond ETF Vanguard 6,747.50 17,416.10 63.25% 872.63

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