All ETF Inflows/Outflows Aren’t The Same

Separating ETF asset flows by investor type can tell a very different story from what you might have heard.

Reviewed by: Cinthia Murphy
Edited by: Cinthia Murphy

The month of May brought near-record asset outflows from equity ETFs totaling about $16 billion. This massive exodus—the biggest single-month outflow since at least early 2014—suggests investors are panicked, trimming their exposure to risk assets at an impressive rate (read: Largest Monthly ETF Outflow Of 2019 In May).

Asset flows are, after all, a good indicator of investor sentiment, even if a laggard one.

Big funds landed on the chopping block in May: the SPDR S&P 500 ETF (SPY) bled $12.5 billion; the Invesco QQQ Trust (QQQ) lost $2.3 billion; the iShares MSCI Emerging Markets ETF (EEM) shed $2 billion; the iShares iBoxx USD High Yield Corporate Bond ETF (HYG) saw outflows of $1.6 billion. The list detailed on our Monthly ETF Flows goes on.

Investor Sentiment? What Investor?

What do these flows actually tell us about how investors feel?

The challenge here is accurately interpreting what this sentiment really is, because there’s more than one type of “investor” in the ETF market due to the nature of the wrapper itself.

The common narrative is that a month like May suggests things are bad because retail investors—advisors, asset allocators, robos and do-it-yourselfers—are bailing out of the equity market. They are panicked.

But ETFs are used by retail investors as buy-and-hold asset allocation tools just as much as they are used by “professional” investors such as institutions and day traders for other purposes, including hedging, proxy for futures, placeholders and shorting.

This investor-type distinction matters for anyone trying to assign meaning to asset flows moves—and to anyone brave enough—or crazy enough—to make trading and allocation decisions based on flows.

Bloomberg Intelligence’s Head of ETFs Eric Balchunas, tired of the prevailing narrative that “every time SPY sees outflows, ‘dumb money’ is behind it,” did some work separating investor type within asset flows. (You can check it out here.)

What he found is truly interesting: Traders and hot money—not retail—bailed on ETFs in May.

It’s Never Been About The ‘Dumb Money’

Hot money—traders—has been coming in and out of the market in massive numbers any given month since President Trump took office (and probably even longer). Not retail investors, whose assets have been sticky through all the ups and downs in recent months.

What that means is that $12.5 billion in assets out of the $255 billion SPDR S&P 500 ETF Trust (SPY) in one month had little to do with how retail investors feel about the market, and everything to do with traders being reactive to daily news, and getting out quickly at any sign of trouble, as they typically do.

No Exact Science, But Good Conversation Starter

At, we offer aggregate numbers for asset flows, because you can’t tell in real time who’s buying what.

The way Balchunas addresses that problem was by creating two indexes comprising various ETFs, one representing the trader/professional crowd, the other retail investors. One includes ETFs that offer ample liquidity—the currency of the trader realm. The other includes low-cost ETFs, since the price tag is what retail cares about. These indexes are proxies at best.

To visualize this difference, see the chart below, courtesy of Bloomberg, showing 12-month asset flows based by investor type:


Through that lens, and the respective ETFs that make each index, Balchunas found that about 90% of outflows or inflows—in an outsized month such as May—are seen in big, very liquid ETFs that traders love: funds like SPY, QQQ, EEM.

Low-cost ETFs accessing these same market segments—those preferred by retail such as iShares Core, Vanguard ETFs and Schwab—actually continued to see inflows in May. Funds like the iShares Core S&P 500 ETF (IVV), and the iShares Core MSCI EAFE ETF (IEFA)—as well as the Vanguard Total Stock Market ETF (VTI) were all net gainers, among others.

In fact, Balchunas noted, since President Trump took office, retail investors have been consistently adding money to risk asset ETFs, capturing pretty much the market’s entire ride up—about 12% annualized for the S&P 500—because their funds are also dirt cheap, so they’ve paid very little to stay invested.

“It’s time to separate those flows,” Balchunas told “May was a bad month, but it’s only when retail investors get rattled that you can actually talk about dedicated buyers leaving the market.”

“In May, traders bailed, and allocators still allocated, just a little less,” he added. “To me, anytime SPY gives or takes $20 billion is just trader noise. Lack of inflows into IEMG [iShares Core MSCI Emerging Markets ETF] speaks louder to me [about investor sentiment] than outflows from EEM. We get a more accurate narrative this way.”

What Asset Flows ‘Predict’

Looking ahead, the summer promises to be volatile, with global growth concerns lingering, trade wars ongoing, and elections in various European countries coming up in the fall.

So what do May asset flows tell us about what the future holds? Muted appetite in May for safe havens such as gold ETFs, and continued demand for equity ETFs by the retail crowd, combined with expectations that the Federal Reserve may cut interest rates ahead, could bode well for ETF asset flows in June. Traders may come back to the risk assets they dumped in May.

“June could be a big month for flows,” Balchunas said.

Contact Cinthia Murphy at [email protected]

Cinthia Murphy is head of digital experience, advocating for the user in all that does. She previously served as managing editor and writer for, specializing in ETF content and multimedia. Cinthia’s experience includes time at Dow Jones and former BridgeNews, covering commodity futures markets in Chicago and Brazil equities in Sao Paulo. She has a bachelor’s degree in journalism from the University of Missouri-Columbia.