Last year's record asset haul looks less likely, even as investors kept plowing money into ETFs in August.
Investors plowed about another $15 billion into exchange-traded funds so far this month and, together with the S&P 500 Index rising to the 2,000 milestone, total assets in U.S.-listed ETFs rose 3 percent in August to a record of nearly $1.913 trillion.
Still, the pace of asset gathering for the 21-year-old ETF industry is lagging 2013. A total of about $106 billion has been hauled in year-to-date, compared with more than $131 billion in the first eight months of 2013. Indeed, it looks unlikely, but not impossible, for asset gathering this year to top last year's record level of $188 billion.
In an immediate sense, redemptions out of the biggest exchange-traded fund of all are to blame for the 2014 lag. The SPDR S&P 500 ETF (SPY | A-98) has had outflows of more than $6 billion in August and more than $14 billion in all of 2014.
The $173 billion fund makes up more than 9 percent of the $1.912 trillion assets now in ETFs. Take those redemptions off the table, and total August flows would bounce up to at least $21 billion and total 2014 flows would be around $120 billion, making the whole flows picture stronger.
More broadly, 2014 started out a bit roughly amid concern that the global recovery might be stalling, and that a long and cold winter was jeopardizing the still-delicate recovery in the U.S. More recently, Europe is looking rather vulnerable, as disinflation in the eurozone looks like it could morph into some sort of Japan-style deflationary crisis.
From an asset class perspective, inflows slightly favored fixed income, which was helped by falling bond yields. Most of the bond inflows—upward of $8 billion—were in U.S.-focused strategies and all across the yield curve and into riskier pockets such as high-yield debt.
Inflows into equities, on the other hand, were concentrated on non-U.S. strategies. Equities creations totaled about $6.8 billion in August, with almost $6.3 billion of that in internationally focused funds.
|August 2014 Flows By Asset Class||Net Flows ($, M)||AUM ($, M)||% of AUM|
|U.S. Fixed Income||7,692.04||263,300.55||2.92%|
|International Fixed Income||62.83||24,942.60||0.25%|
Falling Yields And Bond Flows
This nagging sense of the possibility of another downturn has sent benchmark bond yields lower this year. The 10-year Treasury, which ended 2013 yielding exactly 3 percent, is now yielding 2.34 percent.
All this has been positive for bond ETF flows, as investors interpret the head winds as something of a green light for taking on extra interest-rate risk in the form of owning relatively longer-dated ETFs.
For example, in August, the iShares 7-10 Year Treasury Bond ETF (IEF | A-58) and the long-dated iShares 20+ Year Treasury Bond ETF (TLT | A-85) gathered $1.47 billion and $860 million, respectively. In all of 2014, IEF has pulled in almost $3.9 billion, while TLT has gathered $1.6 billion.
Apart From SPY, Equity Flows Strong
By comparison, SPY, as noted, has suffered outflows of more than $14 billion this year. But before reading doom and gloom into SPY's sizable redemptions, it's crucial to remember that SPY is the most liquid ETF, and is used for all kinds of reasons by all kinds of players.
A good reality check—and a reminder that the S&P 500 Index's record-making run this year is reflective of slowly increasing economic stability in the U.S.—are inflows into the ETF market's other two sizable S&P 500 funds.
The iShares Core S&P 500 ETF (IVV | A-98) and the Vanguard S&P 500 ETF (VOO | A-96) have pulled in $3 billion and $5.3 billion, so far this year, respectively, and, in August, each of the funds added about $1.2 billion in new assets.
On the international side, the iShares MSCI Emerging Markets ETF (EEM | B-98) added almost $900 million in August—a sign that emerging markets are coming back into favor after a major sell-off in 2013.
|August 2014 Top-Gaining ETFs||Issuer||Flows||AUM ($, M)||Turnover|
|iShares 7-10 Year Treasury Bond||BlackRock||1,472.48||7,748.42||3,724.85|
|Vanguard S&P 500||Vanguard||1,243.17||21,803.85||4,272.73|
|iShares 1-3 Year Treasury Bond||BlackRock||1,225.75||9,024.69||3,165.30|
|iShares Core S&P 500||BlackRock||1,147.42||61,268.63||13,664.52|
|iShares MSCI Emerging Markets||BlackRock||883.35||44,334.11||45,492.26|
|Consumer Staples Select SPDR||SSgA||801.74||6,845.57||5,673.39|
|iShares MSCI Hong Kong||BlackRock||788.98||3,221.11||2,012.92|
|Vanguard Total Stock Market||Vanguard||767.09||46,625.16||4,657.87|
|iShares 3-7 Year Treasury Bond||BlackRock||765.20||3,880.24||1,491.69|
|iShares iBoxx $ High Yield Corporate Bond||BlackRock||764.26||12,677.94||8,002.66|
|August 2014 Biggest-Losing Funds|
|Ticker||Fund||Issuer||Flows||AUM ($, M)||Turnover|
|SPY||SPDR S&P 500||SSgA||-6,527.71||172,701.38||357,342.91|
|IJH||iShares Core S&P Mid-Cap||BlackRock||-1,350.94||21,995.28||3,836.11|
|EZU||iShares MSCI EMU||BlackRock||-1,309.86||8,703.65||4,757.10|
|VGK||Vanguard FTSE Europe||Vanguard||-687.46||15,573.56||6,238.48|
|IDU||iShares U.S. Utilities||BlackRock||-640.63||1,143.77||1,032.44|
|XLU||Utilities Select SPDR||SSgA||-639.41||5,935.07||10,453.79|
|OEF||iShares S&P 100||BlackRock||-592.55||4,473.93||1,890.70|
|MVV||ProShares Ultra MidCap 400||ProShares||-538.68||173.45||822.01|
|UWM||ProShares Ultra Russell 2000||ProShares||-515.13||181.08||1,031.50|
|QQQ||PowerShares QQQ||Invesco PowerShares||-497.34||46,754.14||62,410.15|
|August 2014 League Table|
|Issuer||Net Flows||AUM ($M)||% of AUM||Turnover|
|US Commodity Funds||221.07||2,557.27||8.64%||5,489.94|
|Emerging Global Shares||8.94||1,870.19||0.48%||164.48|
|Exchange Traded Concepts||-19.94||1,598.10||-1.25%||133.12|
|Highland Capital Management||13.79||217.47||6.34%||34.29|
|Arrow Investment Advisors||10.38||194.88||5.33%||41.61|
|Huntington Strategy Shares||-1.88||24.16||-7.78%||3.04|