From an ETF outflows perspective, August was as bad as it’s ever been.
Investors yanked more than $17 billion out of U.S.-listed ETFs last month—much of that from bond funds—making it the biggest month of outflows in the 20-year history of the ETF industry, amid continuing anxiety that the Federal Reserve might be on the brink of beginning to end the unprecedented era of easy money that followed the great downturn of 2008 and 2009.
Between the net outflows and the 3 percent pullback in the S&P 500 Index, total U.S.-listed ETF assets fell to $1.487 trillion from $1.534 trillion in July, according to data compiled by IndexUniverse. The outflows in August were enough to again pull the ETF asset-gathering juggernaut off its record pace in 2012, with year-to-date inflows totaling $94 billion compared with nearly $99 billion in the same 2012 period. In 2012, investors plowed a record $188 billion in U.S.-listed ETFs.
That said, the record outflows were fueled to a very significant extent by outflows from the SPDR S&P 500 ETF (SPY | A99), which suffered a whopping $14 billion in redemptions. It’s hard to separate SPY’s day-to-day creations and redemptions from statistical noise, according to Dave Nadig, IndexUniverse’s President of ETF Analytics, so to call August a record month of outflows might be a touch misleading.
That said, the clear trend—or trends—were, as noted, outflows from a variety of bond funds, and inflows into strategies focused on the mid-cap stocks and on a resurgent Europe. Regarding bonds, investors have been trimming duration risk since Ben Bernanke’s suggestion that the Fed might start to “taper” its quantitative easing program sometime this year, and that continued in August as it was in June.
Investors pulled more than $6.5 billion out of bond funds last month, with the iShares 3-7 Year Treasury Bond ETF (IEI |A77) just behind SPY at No. 2 on the redemptions list. IEI has been something of a “canary in the coal mine” regarding investor sentiment surrounding Fed tapering, with the fund losing assets as concern increases about tapering, but gaining assets when those concerns abate.
The bond outflows extended to various pockets of the fixed-income world, including investment-grade and high-yield corporate credits.
“Investors are concerned about now-rising interest rates, and the potential for a further rise in interest rates,” Todd Rosenbluth, an ETF analyst with S&P Capital IQ said in a telephone interview regarding the broad bond outflows last month.
Emerging markets have also been stumbling hard since the prospect of the Fed taking away all the monetary accommodation has come into focus, and flows out of the market's biggest strategy made that plain. The Vanguard FTSE Emerging Markets ETF (VWO | B85) suffered outflows of $1.8 billion, leaving $47 billion in what has become the world’s second biggest ETF.
Warming Up To Europe
He agreed with IU’s Nadig that over-characterizing SPY’s substantial outflows last month was not terribly wise, but did say investors appeared to be warming up to European equities as they scoured for prospective pockets of the investment universe at a time of transition.
While U.S. equities, led by SPY, bled almost $16 billion in assets last month, international equities hauled in almost $3 billion.
The Vanguard FTSE Europe ETF (VGK | A95) was No. 2 on the creations list, pulling in about $1.5 billion, with its total assets ending the month at more than $8 billion after ending July with $6.8 billion.
But topping the creations list was the iShares Core S&P Mid-Cap ETF (IJH | A81), which pulled in $2.2 billion. Between IJH’s inflows and moves into other mid-cap strategies, it was tempting to see a rotation out of large-cap stocks and into mid caps, IU’s Nadig said.
|August 2013 Biggest Losers ($, Millions)|
|Ticker||Name||Issuer||August 2013 Flows||August 2013 AUM ($, M)||August 2013 Turnover|
|SPY||SPDR S&P 500||SSgA||-14,030.65||135,732.78||381,043.03|
|IEI||iShares 3-7 Year Treasury Bond||BlackRock||-2,335.08||2,519.37||3,961.96|
|LQD||iShares iBoxx $ Investment Grade Corporate Bond||BlackRock||-1,289.96||17,578.33||4,817.40|
|VWO||Vanguard FTSE Emerging Markets||Vanguard||-1,184.62||47,273.61||14,721.32|
|QQQ||PowerShares QQQ||Invesco PowerShares||-1,098.91||35,800.50||40,315.92|
|XLP||Consumer Staples Select SPDR||SSgA||-1,070.86||5,407.63||6,248.72|
|XLF||Financial Select SPDR||SSgA||-1,049.44||14,889.63||15,870.58|
|DIA||SPDR Dow Jones Industrial Average Trust||SSgA||-998.65||11,655.01||18,977.25|
|SHV||iShares Short Treasury Bond||BlackRock||-936.99||3,681.68||2,271.77|
|HYG||iShares iBoxx $ High Yield Corporate Bond||BlackRock||-831.52||14,268.65||7,575.52|
|August 2013 Top Gainers ($, Millions)|
|Ticker||Name||Issuer||August 2013 Flows||August 2013AUM ($, M)||August 2013 Turnover|
|IJH||iShares Core S&P Mid-Cap||BlackRock||2,176.34||18,798.31||4,846.58|
|VGK||Vanguard FTSE Europe||Vanguard||1,484.53||8,135.37||3,963.10|
|MVV||ProShares Ultra MidCap 400||ProShares||1,323.00||1,275.04||1,734.75|
|EZU||iShares MSCI EMU||BlackRock||973.73||3,540.21||2,791.74|
|EFA||iShares MSCI EAFE||BlackRock||849.82||42,311.81||19,335.51|
|VEA||Vanguard FTSE Developed Markets||Vanguard||572.74||14,820.62||2,690.80|
|FEEU||Barclays ETN+ FI Enhanced Europe 50||Barclays Capital||509.13||787.29||95.99|
|VOO||Vanguard S&P 500||Vanguard||456.91||10,786.07||2,275.60|
|BSV||Vanguard Short-Term Bond||Vanguard||424.13||13,237.56||1,950.99|
|BKLN||PowerShares Senior Loan||Invesco PowerShares||373.54||5,309.08||1,505.42|
|August 2013 Asset Classes Net Flows ($, mm) AUM ($, mm) % of AUM|
|U.S. Equity||- 15,876.92||773,253.77||-2.05%|
|U.S. Fixed Income||-6,654.66||222,590.51||-2.99%|
|International Fixed Income||-268.67||25,083.61||-1.07%|
|August 2013 League Tables|
|Issuer||Net Flows||AUM ($M)||% of AUM||Turnover|
|US Commodity Funds||20.84||2,578.95||0.81%||7,832.80|
|Emerging Global Shares||41.83||1,340.82||3.12%||185.63|
|Exchange Traded Concepts||10.06||250.12||4.02%||47.54|
|Highland Capital Management||5.99||101.59||5.90%||17.15|
|Arrow Investment Advisors||-5.67||73.04||-7.77%||47.77|
|Huntington Strategy Shares||-||27.15||0.00%||4.08|