Why This Retail ETF Doubled Its Assets In A Week

January 12, 2017

From a flows perspective, 2017 has been a good year so far for the SPDR S&P Retail ETF (XRT). In the past five trading sessions, the ETF picked up $350 million in new assets, more than doubling its total assets under management to $624 million.

Ordinarily, that might be big news. However, a look under the hood reveals XRT routinely has large fluctuations in the amount of assets that it holds. Some of it has to do with changes in the prices of the ETF's underlying holdings―which can be volatile―but most of it has to do with big traders quickly coming in and out of the fund.

Some ETFs are used by investors (think Vanguard funds, which are held for years), and some are used by traders, which are held for much shorter time periods. XRT is the latter.

Assets in the fund fell below $300 million at the end of last year, tripled to almost $900 million a few days later and then edged modestly lower to over $600 million. Clearly, someone is making big bets on retail and using XRT as the vehicle to do so.

XRT Assets Under Management

Source: Bloomberg

A Volatile Industry

It's understandable why retail stocks would be a focus for traders. The group swings around wildly based on the ever-shifting outlook for the domestic economy and changing profit expectations for individual companies.

Retailers shot higher in November and early December amid speculation that Trump's victory would be a boon for the U.S. economy, spurring consumers to spend more.

But then reports of tepid holiday sales began trickling out, dampening enthusiasm for the group. Last week, Macy's, Kohl's and Barnes & Noble reported disappointing sales figures for the holiday season, fueling selling across the retail industry.

Adding to the confusion, research firm Adobe Digital Insights reported a few days ago that online retail sales surged 11% year-over-year during the November through December holiday period to a record $91.7 billion. Incidentally, e-commerce giant Amazon.com accounted for the bulk of those sales―38%, according to a separate report from Slice Intelligence―far ahead of second-place Best Buy's 3.9%.


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