New ETFs Join $1B Club Quickly

May 28, 2019

Last week, two notable new socially responsible ETFs saw massive inflows that pushed both funds above $1 billion in assets under management (AUM).

On Thursday, the Xtrackers MSCI U.S.A. ESG Leaders Equity ETF (USSG) brought in $280 million in new net money, bringing its total AUM to $1.15 billion.

The very next day, the iShares ESG MSCI USA Leaders ETF (SUSL) brought in $316 million, pushing its total AUM to $1.16 billion.

Notably, that particular inflow makes SUSL now the third-fastest ETF to reach $1 billion, breaking the barrier just 16 days post-inception. It also barely misses the record set by the JPMorgan BetaBuilders Canada ETF (BBCA), which broke $1 billion in 15 days (read: "New Canada ETF 2nd Fastest To $1B").

The ETF to hit $1 billion fastest is the SPDR Gold Trust (GLD), which struck that record in just three days of trading.

USSG, SUSL Backed By Same Institution

As we've covered before, USSG and SUSL are very similar ETFs: Both funds track large and midcap U.S. stocks selected from the MSCI USA Index. Both use environmental, social, governance (ESG) factors to rank and weight their constituent stocks. And both ETFs screen out companies involved in controversial industries, such as tobacco, alcohol, gambling, civilian firearms, etc. 

They are also backed by the same institutional investor. Ilmarinen, Finland's largest mutual pension insurer, worked with both DWS Group and BlackRock to develop their respective funds, then dropped roughly $850 million into each (read: "New ESG ETF Has Blockbuster Debut").

It is unclear if Ilmarinen is behind last week's flows as well.

What is clear, however, is that the funds have yet to attract organic flows: So far, the vast majority of money that has entered USSG and SUSL did so in large block trades:

 

Source: ETF.com; data as of May 28, 2019

 

USSG & SUSL Differ On Screens, Price

The main differences between USSG and SUSL are ESG screening criteria and price. SUSL uses slightly more stringent exclusionary criteria for civilian firearms companies, and tighter restrictions over ESG cut-offs for constituent stocks.

Meanwhile, USSG has an expense ratio of 0.10%, compared to SUSL's 0.15% (read: "ETF Of The Week: Unexpected Horse Race").

However, there's very little difference in holdings between the two funds, and performancewise, the two ETFs have mostly moved together: Since May 7, SUSL's inception date, SUSL is down 1.23%, whereas USSG is down 1.31%.

Over the same period, the SPDR S&P 500 ETF Trust (SPY) is down 1.79%.

New Funds Trouncing Old

Last week's flows make SUSL now the second-largest socially responsible ETF, after the $1.4 billion iShares MSCI KLD 400 Social ETF (DSI). DSI, however, has been trading since 2006, whereas SUSL just launched this month.

USSG, which launched in March, is now third-largest, just ahead of the $1.0 billion iShares MSCI U.S.A. ESG Select ETF (SUSA), which has very similar methodology to both USSG and SUSL, but which launched in 2005.

 

Top 5 Largest ESG ETFs
Ticker Fund AUM ($M) MSCI ESG Ranking
DSI iShares MSCI KLD 400 Social ETF  1,382 7.50
SUSL iShares ESG MSCI USA Leaders ETF  1,160 N/A
USSG Xtrackers MSCI U.S.A. ESG Leaders Equity ETF 1,150 N/A
SUSA iShares MSCI U.S.A. ESG Select ETF 1,010 8.73
ESGD iShares ESG MSCI EAFE ETF 793 8.05

Source: ETF.com; data as of May 28, 2019
MSCI ESG Rankings are out of a possible 10, with 10 being the highest score.

 

Contact Lara Crigger at [email protected].

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