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.
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.
|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|
|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. Fixed Income||6,531.42||311,613.28||2.10%|
|International Fixed Income||-703.60||25,554.28||-2.75%|