October was the best month for U.S. stock markets in years. The S&P 500 rallied 8.3 percent in the period, the largest increase since October of 2011. But while the S&P 500 was rallying, that wasn't where ETF investors were focusing their buying.
The world's largest exchange-traded fund tied to the index, the SPDR S&P 500 (SPY | A-99), actually had net outflows of $2.7 billion.
Two other S&P 500 funds, the Vanguard S&P 500 (VOO | A-99) and the iShares Core S&P 500 (IVV | A-99), saw inflows of $924 million and $725 million, respectively, but these broad stock market ETFs weren't the highlights of the month.
Corporate Bonds In Favor
The real ETF buying took place in the corporate bond space. Three funds in particular saw steady inflows all month long: the SPDR Barclays High Yield Bond ETF (JNK | B-68), the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD | A-77) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG | B-68).
Investors plowed a combined $7.7 billion into the trio as economic concerns eased. At the end of September, the two junk bond ETFs―HYG and JNK―touched their lowest price since 2011, a time when the eurozone debt crisis was in full swing. Evidently, those depressed prices prompted bargain-hunting investors to swoop in and buy.
For LQD, which holds higher-quality corporate bonds, the pullback in September was less aggressive, sending prices to their lowest point since early 2014. Still, investors thought that was also cheap enough to scoop up.
Europe And Emerging Markets
Outside the corporate bond space, the biggest inflows went into the iShares MSCI EMU ETF (EZU | A-83), which tracks companies from countries that use the euro currency. EZU picked up $1.5 billion in assets in October.
Another international ETF that gained assets was the iShares Core MSCI Emerging Markets ETF (IEMG | A-99). Like junk bonds, emerging markets were pounded in August and September before bouncing back in October. The $939 million of inflows into IEMG may signal that some investors believe the worst is behind for this battered area.
Biotech & Gold Miner ETFs See Outflows
At the other end of the spectrum are the ETFs with the most outflows in October. A few Treasury ETFs found themselves on this list: the iShares 3-7 Year Treasury Bond ETF (IEI | A-73) and the iShares 1-3 Year Treasury Bond ETF (SHY | A-97). These outflows could simply be investors anticipating higher rates ahead of likely Fed hikes later this year or early next year.
On the equity side, biotech was out of favor, with the iShares Nasdaq Biotechnology ETF (IBB | A-49) seeing $514 million in outflows. Accusations about price gauging in the pharmaceutical industry by politicians and some in the media raised fears about potential profit-reducing regulations down the line.
Finally, the Market Vectors Gold Miners ETF (GDX | C-78) was another big loser, with $470 million in outflows. Both gold mining stock and the price of gold bounced significantly in October, and apparently, some ETF investors used that bounce to sell out of their positions. GDX has been a lousy performer this year, losing close to 19 percent of its value so far in 2015.
|JNK||SPDR Barclays High Yield Bond||SSgA||2,700.76||11,892.46||10,611.64|
|LQD||iShares iBoxx $ Investment Grade Corporate Bond||BlackRock||2,571.02||24,786.63||8,980.37|
|HYG||iShares iBoxx $ High Yield Corporate Bond||BlackRock||2,446.93||15,502.17||18,882.98|
|EZU||iShares MSCI EMU||BlackRock||1,506.21||13,251.55||5,892.61|
|IWD||iShares Russell 1000 Value||BlackRock||1,126.82||26,464.68||5,544.87|
|AGG||iShares Core U.S. Aggregate Bond||BlackRock||987.01||27,573.87||6,831.60|
|QQQ||PowerShares QQQ||Invesco PowerShares||977.79||42,119.98||79,828.19|
|IEMG||iShares Core MSCI Emerging Markets||BlackRock||938.52||8,604.02||3,613.69|
|VOO||Vanguard S&P 500||Vanguard||923.57||38,463.38||7,039.07|
|IVV||iShares Core S&P 500||BlackRock||725.06||69,919.70||17,989.30|
|SPY||SPDR S&P 500||SSgA||-2,673.50||179,508.34||510,826.73|
|IWM||iShares Russell 2000||BlackRock||-699.98||25,983.29||91,143.15|
|IEI||iShares 3-7 Year Treasury Bond||BlackRock||-585.61||5,561.76||1,699.02|
|SHV||iShares Short Treasury Bond||BlackRock||-529.40||3,484.22||2,321.12|
|IBB||iShares Nasdaq Biotechnology||BlackRock||-513.93||8,226.70||24,183.32|
|GDX||Market Vectors Gold Miners||Van Eck||-470.03||4,540.83||24,893.26|
|SHY||iShares 1-3 Year Treasury Bond||BlackRock||-441.69||12,894.16||5,438.76|
|XIV||VelocityShares Daily Inverse VIX Short Term ETN||VelocityShares||-436.16||1,173.78||17,841.03|
|VBK||Vanguard Small-Cap Growth||Vanguard||-387.90||4,412.18||364.58|
|TQQQ||ProShares UltraPro QQQ||ProShares||-375.05||1,213.74||8,950.28|
|Net Flows ($M)||AUM ($M)||% of AUM|
|U.S. Fixed Income||11,347.95||332,711.07||3.41%|
|International Fixed Income||300.93||27,009.16||1.11%|
|October 2015 League Tables|
|Issuer||Net Flows||AUM ($M)||% of AUM||Turnover|
|Van Eck||- 100.37||19,831.48||-0.51%||47,233.94|
|US Commodity Funds||328.80||4,088.32||8.04%||10,889.43|
|ETF Securities||- 17.26||2,002.41||-0.86%||207.78|
|Millington Securities Inc||8.77||1,543.85||0.57%||95.07|
|Emerging Global Shares||- 114.50||1,057.54||-10.83%||281.87|
|Swedish Export Credit||14.57||575.84||2.53%||115.75|
|Exchange Traded Concepts||-4.12||503.85||-0.82%||48.84|
|Highland Capital Management||-1.84||326.59||-0.56%||41.74|
|Franklin ETF Trust||-||189.68||0.00%||1.05|
|Arrow Investment Advisors||-||174.57||0.00%||68.48|
|The Principal Financial Group||3.78||31.46||12.02%||9.80|
|Royal Bank of Canada||-||22.61||0.00%||4.19|
|TrimTabs Asset Management||-||14.68||0.00%||0.18|
|Huntington Strategy Shares||-||13.34||0.00%||1.71|
|ETF Managers Capital LLC||-||7.14||0.00%||0.14|
|ETF Issuer Solutions||-||-||-||-|
Contact Sumit Roy at [email protected].