ETF Investors Flee Int’l Stocks

October 24, 2019

Last week, ETFs.com’s weekly flows article showed that this year’s pace of inflows had surpassed that of last year. A total of $211.7 billion flowed into U.S.-listed ETFs as of Thursday, Oct. 17, more than the $201.8 billion at the same time in 2018.

While demand for U.S. fixed income ETFs has been strong all year long, inflows were able to surpass the pace of last year thanks to the interest in U.S. equity ETFs. The asset class has picked up $83.6 billion in fresh cash this year, just a bit below the $88.5 billion of inflows they had at the same time a year ago.

Stocks Sit Near All-Time Highs
It makes sense that investors would be adding to their U.S. stock ETFs. Despite a multitude of head winds—from trade wars to slowing economic growth to sagging corporate earnings—the S&P 500 stands just 1% off its all-time high, returning 21.8% on a year-to-date basis.

The U.S. economy continues to outperform its developed market counterparts, with growth in the first half of the year clocking in at 2.5%, and unemployment in October falling to 3.5%, a 50-year low.

That compares favorably with Europe, which is projected by the International Monetary Fund to grow 1.2% this year; and Japan, which may grow only 0.9%. The IMF expects the U.S. to grow by 2.4% for the full year.

Year-To-Date Net Outflows
It’s no wonder then that investors have been plowing money into U.S. equity ETFs and not international equity ETFs. The latter segment had actually seen net year-to-date outflows of $1.3 billion as of last week, compared with net inflows of $40.8 billion at this same time a year ago.

Though several low-cost international equity ETFs have seen sizable inflows this year—including the iShares Core MSCI EAFE ETF (IEFA), the Vanguard Total International Stock ETF (VXUS), the iShares Core MSCI Total International Stock ETF (IXUS), the iShares Core MSCI Emerging Markets ETF (IEMG) and the Vanguard FTSE Emerging Markets ETF (VWO)—that’s been offset by equally large outflows from higher-cost funds.

 

Top Int’l Equity Inflows

Ticker Fund YTD Net Flows ($M)
IEFA iShares Core MSCI EAFE ETF 7,478
VXUS Vanguard Total International Stock ETF 4,483
IXUS iShares Core MSCI Total International Stock ETF 3,594
IEMG iShares Core MSCI Emerging Markets ETF 2,824
VWO Vanguard FTSE Emerging Markets ETF 2,317
SCHF Schwab International Equity ETF 2,018
EFAV iShares Edge MSCI Min Vol EAFE ETF 1,580
ACWV iShares Edge MSCI Min Vol Global ETF 1,440
BBCA JPMorgan BetaBuilders Canada ETF 1,398
BBEU JPMorgan BetaBuilders Europe ETF 1,015

 
The iShares MSCI EAFE ETF (EFA), the iShares MSCI Emerging Markets ETF (EEM) and the iShares MSCI Japan ETF (EWJ) have had outflows ranging from $4.4 billion to $9.7 billion so far this year.

 

Top Int’l Equity Outflows

Ticker Fund YTD Net Flows ($M)
EFA iShares MSCI EAFE ETF -9,720
EEM iShares MSCI Emerging Markets ETF -5,469
EWJ iShares MSCI Japan ETF -4,423
VT Vanguard Total World Stock ETF -1,738
EZU iShares MSCI Eurozone ETF -1,656
ACWI iShares MSCI ACWI ETF -1,605
FXI iShares China Large-Cap ETF -1,514
DXJ WisdomTree Japan Hedged Equity Fund -1,459
VGK Vanguard FTSE Europe ETF -1,377
ACWX iShares MSCI ACWI ex U.S. ETF -1,263

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