Equity ETFs Lead October $26B ETF Inflows

November 01, 2013

ETF investors took on risk in October, even if that sentiment tailed off a bit late in the month.

Investors continued to demonstrate their appetite for risk in October, pouring nearly $30 billion into U.S. and international equity ETFs last month, as the U.S. stock market reached, yet again, new record highs. Total assets invested in U.S.-listed ETFs rose almost 5 percent to $1.64 trillion—a figure that includes net inflows as well as upward market movement.

Funds like the SPDR S&P 500 (SPY| A-100) and the iShares Core S&P MidCap ETF (IJH | A-81) led a group of U.S., Europe and emerging-market-focused ETFs in the lineup of funds comprising the month’s top 10 creations list, with net inflows of $4.77 billion and $2.96 billion, respectively.

The flows came as the S&P 500 Index rallied 4.45 percent in the period to end the month at 1,756.54, just off its freshly minted record closing of 1,771.95. The market’s relatively tapered upward momentum seen in the last two days of October, however, came on the heels of a Federal Reserve statement that didn’t seem to recognize recently deteriorating economic data, leading many to interpret it as a suggestion that the Fed might begin tapering its massive quantitative easing sooner rather than later.

Many argue that, by and large, it’s been this ongoing era of easy money and compressed interest rates—rather than a strong U.S. economic recovery—that has fueled much of the voracious appetite for risky assets such as equities. In the absence of the Fed’s hand, some fear that U.S. stocks might lose their momentum.

In all, the ETF market attracted a net of $25.98 billion in fresh new assets in October, pushing total U.S.-listed assets, as noted, to $1.640 trillion, its highest monthly total yet. So far this year, a net of $161 billion of fresh asset have found their way into the ETF market, putting it on track to beating last year’s record of $188 billion in net inflows during the 12 months ended December.

The iShares 3-7 Year Treasury Bond ETF (IEI | A-76) and the ProShares Ultra 7-10 Year Treasury ETF (UST), funds that were among the most popular ETFs in September, with net inflows of $2.8 billion and $789 million, respectively, were among the least popular ETFs in October.

IEI, in fact, led the month’s redemptions, with net outflows of $2.75 billion—practically erasing the net inflows it had seen in the third quarter of roughly $3 billion. UST, meanwhile, bled $839 million in the period. Fixed-income ETFs were, generally, net losers in October, shedding roughly $2.3 billion in net assets last month.

Another interesting dynamic that continued to play out in October was the asset battle between the iShares MSCI Emerging Market ETF (EEM | B-97) and the Vanguard FTSE Emerging Market ETF (VWO | B-86).

VWO saw net outflows of $760 million last month, ranking it among the funds that suffered the biggest redemptions in October, while EEM found itself among the most popular ETFs, with net inflows of $1.29 billion.

Since Oct. 1, 2012, when Vanguard first announced it would replace VWO’s MSCI benchmark with a FTSE index, VWO has gone on to lose a net of $5.75 billion in the 13-month period, while EEM has gathered a net of $6.45 billion in the same period, according to data compiled by IndexUniverse.

VWO has now $51.76 billion in total assets, while EEM has $44.74 billion.

Top Gainers ($, Millions)

Ticker Name Issuer October 2013 Flows October 2013 AUM ($, M) October 2013 Turnover
SPY SPDR S&P 500 SSgA 4,772.29 157,234.32 496,777.69
IJH iShares Core S&P Mid-Cap BlackRock 2,957.14 21,285.14 6,230.81
EFA iShares MSCI EAFE BlackRock 1,399.76 48,486.13 22,715.79
VGK Vanguard FTSE Europe Vanguard 1,332.39 12,060.92 5,787.10
MVV ProShares Ultra MidCap 400 ProShares 1,332.07 1,533.79 1,861.61
QQQ PowerShares QQQ Invesco PowerShares 1,294.82 41,430.00 65,710.96
EEM iShares MSCI Emerging Markets BlackRock 1,292.90 44,740.11 55,028.72
MDY SPDR S&P MidCap 400 SSgA 1,261.14 16,223.89 18,908.22
VTI Vanguard Total Stock Market Vanguard 1,116.33 36,531.14 6,038.18
XLP Consumer Staples Select SPDR SSgA 1,067.90 6,663.23 8,480.62

Biggest Losers ($, Millions)

Ticker Name Issuer October 2013 Flows October 2013 AUM ($, M) October 2013 Turnover
IEI iShares 3-7 Year Treasury Bond BlackRock -2,747.35 2,641.63 4,412.30
IWM iShares Russell 2000 BlackRock -1,691.84 26,910.74 95,309.81
GLD SPDR Gold SSgA -1,409.49 37,106.21 25,786.47
UST ProShares Ultra 7-10 Year Treasury ProShares -839.03 13.20 1,225.60
LQD iShares iBoxx $ Investment Grade Corporate Bond BlackRock -793.26 16,600.09 4,078.69
VWO Vanguard FTSE Emerging Markets Vanguard -759.85 51,759.13 15,913.38
IDU iShares U.S. Utilities BlackRock -625.37 668.08 1,050.80
SPLV PowerShares S&P 500 Low Volatility Invesco PowerShares -497.62 3,941.46 1,276.76
BIL SPDR Barclays 1-3 Month T-Bill SSgA -448.59 1,048.48 1,501.36
TLT iShares 20+ Year Treasury Bond BlackRock -378.54 2,737.73 19,241.60

Asset Class Data

  Net Flows ($, mm) AUM ($, mm) % of AUM
U.S. Equity 17,520.60 864,459.11 2.03%
International Equity 12,411.06 400,609.44 3.10%
U.S. Fixed Income -2,105.93 232,328.61 -0.91%
International Fixed Income -242.63 21,506.85 -1.13%
Commodities -2,376.55 72,816.76 -3.26%
Currency 435.71 2,679.32 16.26%
Leveraged 801.65 19,280.43 4.16%
Inverse -402.19 19,351.04 -2.08%
Asset Allocation -95.57 3,696.86 -2.59%
Alternatives 35.22 3,609.21 0.98%
Total: 25,981.35 1,640,337.63 1.58%

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