Fidelity Flood

September 01, 2006

Fidelity suffers $2.24 billion in July outflows even as BGI pulls in another $4.7 in new money.

U.S. exchange-traded funds (ETFs) eked out another month of growth in July, thanks largely to strong asset flows into Global/International funds.  Total U.S. ETF assets rose by $1.81 billion for the month, or just 0.5 percent, to $336.92 billion, according to the Investment Company Institute (ICI).

In the head to head battle of traditional actively managed fund behemoth Fidelity and that new school inflow slurper iShares, Fidelity suffered $2.24 billion in July outflows even as Barclays Global Investors (BGI) pulled in another $4.7 billion in assets.

A more detailed look at the ICI ETF data reveals a bifurcated market. Domestic equity ETF assets actually fell by nearly $1 billion in the U.S., while international funds gathered more than $2 billion; bond funds pulled in an additional $600 million.

International ETFs make up a larger and larger percentage of total assets. International ETF assets have grown 93 percent over the past year, from $44.0 billion to $84.8 billion.  Last July, they made up just 17 percent of total ETF assets; today, they represent 25 percent of total ETF assets.  (As of July 31, U.S. domestic equity ETFs held $233.9 billion, or 69 percent of total ETF assets; international funds held $84.8 billion, or 25 percent of total assets; and fixed-income funds held $18.2 billion, or 6 percent of total U.S. assets.)

All told in July, gross issuance of ETF shares outweighed gross redemptions by $2 billion, down from nearly $11 billion in June.

While the ICI statistics suggest at least a temporary leveling of growth in the ETF space, they understate the true growth in the industry, as they exclude commodity-related funds. Those funds are some of the hottest products on the market, and are showing some of the strongest growth.  

Broadening out, the U.S. mutual fund industry grew by 0.4 percent in July, according to the ICI, with assets under management rising by $40 billion to $9.377 trillion.  Again, U.S. equity funds experienced net outflows for the month, while international funds aw rising assets.

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