August ETF Flows Slow To A Trickle

September 01, 2015

Investors yanked assets from equity ETFs in August, and poured into U.S. fixed-income funds instead in a classic case of running for the hills as global markets plunged.

In the aggregate, ETF flows dropped to a trickle in August, totaling only $2.7 billion—a far cry from the $23 billion in net creations the market saw in July. That numbers puts year-to-date ETF flows at roughly $127 billion, a level that could still be on pace to match last year's record asset haul of $243 billion. Second-half ETF flows have historically been more powerful than in the first half.

Roller-Coaster Ride

August was a volatile month, seeing a major stock correction in China that sent shock waves through markets across the globe. China's struggle with spurring growth wasn't news to anyone, but August saw the government there attempt to intervene further in an effort to prop up the market. That did not bode well for investor confidence.

Instead, mainland Chinese stocks slipped nearly 20 percent in August, while Hong Kong-listed securities were down about 12 percent. Emerging markets as a group declined nearly 10 percent, with just about every emerging market posting declines for the month, and many seeing double-digit dips, according to S&P Dow Jones Indices data.

In the U.S., global woes translated into a 6 percent drop for the month, and a number of days when market action was nothing short of spectacular. The Dow Jones industrial average tanked 1,000 points before bouncing back at one point last week, and the S&P 500 flirted with a 10 percent decline.

Flocking To Fixed Income
That backdrop sent investors looking for the safety of U.S. fixed income, an asset class that attracted more than $6.5 billion in fresh net assets in a month.

The bulk of those dollars landed in shorter-dated high-quality debt funds—the kind that offers the safety of Treasurys without too much interest rate risk—such as iShares Short Treasury Bond ETF (SHV | A-96) and the iShares 7-10 Years Treasury Bond ETF (IEF | A-51), each of which gathered approximately $1 billion.

Among the month's most popular funds was also a minimum-volatility fund as well as an inverse VIX ETF—strategies that point to just how investors felt about markets.

The flip side of that trade was massive outflows from equity ETFs, which saw some $6.3 billion in net redemptions. U.S. stock funds lost $2.5 billion and international stock ETFs bled $3.8 billion.

Equity Safety Stalwarts Attract
A late-month respite from weakness brought some U.S. equity ETFs into the most popular mix—massive funds such as the SPDR S&P 500 (SPY | A-99) and the Vanguard S&P 500 (VOO | A-99)—as investors showed preference for the relative safety of U.S. large-cap stocks, among other equities.

In the equity segment, particularly notable were outflows from emerging market ETFs.

In fact, the two biggest funds in the segment, the Vanguard FTSE Emerging Market ETF (VWO | B-88) and the iShares MSCI Emerging Market ETF (EEM | B-100) topped the list of redemptions, with outflows of $1.3 billion each.

Top Gainers

Ticker Fund Issuer Flows AUM ($M) Turnover
VOO Vanguard S&P 500 Vanguard 1,563.71 33,714.71 13,904.27
SPY SPDR S&P 500 SSgA 1,472.03 167,606.81 749,391.10
SHV iShares Short Treasury Bond BlackRock 1,301.16 3,451.41 2,815.26
DBEF Deutsche X-trackers MSCI EAFE Hedged Equity ETF Deutsche Bank 1,100.51 13,526.76 3,845.96
IEF iShares 7-10 Year Treasury Bond BlackRock 1,086.16 7,862.71 4,275.86
XIV VelocityShares Daily Inverse VIX Short Term ETN VelocityShares 981.72 1,141.13 21,722.90
SHY iShares 1-3 Year Treasury Bond BlackRock 974.71 11,937.08 4,118.33
BIL SPDR Barclays 1-3 Month T-Bill SSgA 881.98 2,280.33 1,999.14
VTI Vanguard Total Stock Market Vanguard 848.67 54,266.81 9,987.37
USMV iShares MSCI USA Minimum Volatility BlackRock 844.62 5,872.40 1,872.64

Biggest Losers

Ticker Fund Issuer Flows AUM ($M) Turnover
VWO Vanguard FTSE Emerging Markets Vanguard -1,390.26 38,891.51 17,788.96
EEM iShares MSCI Emerging Markets BlackRock -1,377.29 20,998.80 57,634.94
XLV Health Care Select SPDR SSgA -1,065.10 14,120.68 19,393.62
XLK Technology Select SPDR SSgA -1,028.91 11,289.04 11,696.29
EMB iShares J.P. Morgan USD Emerging Markets Bond BlackRock -967.90 4,198.17 2,778.95
XLF Financial Select SPDR SSgA -857.57 18,135.07 24,588.14
IBB iShares Nasdaq Biotechnology BlackRock -801.24 8,238.34 16,008.22
RSP Guggenheim S&P 500 Equal Weight Guggenheim -669.82 9,708.95 2,716.79
HYG iShares iBoxx $ High Yield Corporate Bond BlackRock -653.12 12,839.27 15,026.50
AAXJ iShares MSCI All Country Asia ex Japan BlackRock -645.83 2,695.24 2,762.09

Asset Class Data

Net Flows ($M) AUM ($M) % of AUM
U.S. Equity -2,495.22 1,111,650.12 -0.22%
International Equity -3,796.72 476,882.31 -0.80%
U.S. Fixed Income 6,531.42 311,613.28 2.10%
International Fixed Income -703.60 25,554.28 -2.75%
Commodities 829.37 51,828.36 1.60%
Currency -53.23 1,279.38 -4.16%
Leveraged 1,879.56 24,119.45 7.79%
Inverse 789.77 19,646.19 4.02%
Asset Allocation -58.19 5,565.45 -1.05%
Alternatives -191.70 3,836.48 -5.00%
Total: 2,731.47 2,031,975.29 0.13%

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