Key ETF Indicators Tinged With Gold

October 14, 2019

The ETF Think Tank is a community of advisors focused on a client-centric approach to investing through the use of ETFs. Each week we disseminate research on the growth of the ETF industry, including key performance indicators (KPIs) on number of ETFs listed, assets, revenue, exchange market share and number of issuers. This data is useful in serving to monitor the trends in the ETF ecosystem. ETF Think Tank produces this monthly report for



Flows Are Golden

Flows arguably reflect investor decisions and sentiment. Eric Balchunas of Bloomberg pointed out on Twitter Friday that annual gold ETF flows are just shy of the $10 billion record set in 2009, which is a “notable feat given the increase competition (and attacks) from crypto, as well as the fact that in 2009 gold was up 10% more than this year.”

However, according to Bloomberg, even more notable is the fact that gold was up about 30.14% over the previous two years when the S&P 500 was down 20.15% (Dec. 31, 2007 to Dec. 31, 2009). Could it be that flows are telegraphing market sentiment for risk management?

The market tone is that of complacency, and while tactical investing has generally not read the tea leaves well these past 10 years, it’s worth noting that the SPDR Gold Trust (GLD) was up 68.23% from Dec. 31, 2007 to Dec. 31, 2010 versus a negative 8.12%, so in certain periods, tactical has paid off.




Tactical Defense

The iShares allocation funds targeting risk funds were launched on Nov. 11, 2008, and during the preceding two years, GLD was up 91.06%—about triple that of the iShares Core Moderate Allocation ETF (AOM), the moderate risk allocation. The point is that gold added value during the tough periods, and a tactical increase would have helped lower volatility and even add alpha.

Of course, this was a special period, and since November 2010, GLD has mostly only treaded water—up about 3.19%.

What is a fair risk-adjusted return, or at least an easy way to measure such an objective: active, passive, traditional beta or smart beta? All these labels are complicated; especially when you throw in the definition of factors.

The answer arguably may lie with AOM and three other ETFs from that iShares suite:

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