A close look at the most popular new ETFs reveals a vibrant and varied fund industry.
Here at ETF.com, we monitor ETF flows religiously on a daily basis. Our daily flows report is based on total dollars; we often see the same tickers on the list.
Those usually include tickers like the SPDR S&P 500 ETF (SPY | A-98), the iShares MSCI Emerging Markets ETF (EEM | B-99) and the SPDR Gold Shares (GLD | A-100) because they’re some of the largest ETFs in the world. So, naturally, big money is constantly moving in and out of these funds.
But I also like to look at flows as a percentage of assets under management (AUM) to gauge which themes new money is flowing into and how macro sentiment may be changing in certain markets.
After all, a $100 million inflow into a $200 million fund (50 percent of AUM) carries a bigger impact on the fund than a $100 million inflow into a $43 billion fund like EEM (0.23 percent of AUM).
As most of us are aware, AUM is calculated by multiplying the fund’s net asset value (NAV) per share by total shares outstanding. So, there are two components to a fund’s asset growth: appreciation in the underlying securities; and the creation of new shares from inflows.
Oftentimes the two go hand in hand. As a fund performs well, it generates more attention, so investors tend to throw more money into the fund, and vice versa.
For the purpose of this blog, I looked at ETF assets on Jan. 1, 2014, and total year-to-date flows into the fund, as of July 31, 2014. These growth figures are based solely on inflows, so it doesn’t take into account any NAV appreciation. I also excluded funds that launched in 2014, as well as any funds classified by ETF.com as “inverse” or “leveraged.”
Jan, 1, 2014 AUM: $22.4 million
2014 Inflows: $222 million
2014 Fund Growth: 993 percent
Launched in August 2012, BBRC was the first-to-market “beyond BRICs”-themed ETF. Not only does BBRC strip out the BRICs, but it also strips out South Korea and Taiwan, and saves 25 percent of its weighting for frontier markets.
For 58 basis points, BBRC holds 75 securities from smaller emerging markets like Mexico, South Africa and Malaysia, and 15 securities from larger frontier markets like Qatar and Nigeria, effectively making it a “smaller emerging market/larger frontier market” blended ETF. It now trades more than $1.3 million a day, but spreads still average 31 basis points, so limit orders are recommended.
It seems the “beyond BRICs” theme is catching on. BBRC’s competitor, the Global X Next Emerging & Frontier ETF (EMFM | C-36), was the sixth-fastest-growing ETF, with 2014 fund growth of 973 percent. It also suggests more investors are accepting blurring the line between the emerging and frontier markets.
I expect this theme to gain momentum in the coming years.