ETF Winners & Losers In Smart Beta Asset Race
Not all pockets of smart-beta ETFs are gathering assets this year, but some are hugely popular.
Smart-beta ETFs continue to rake in assets, taking in $3.5 billion in September alone, but there are specific pockets of this segment that are doing a better job attracting investor dollars this year than others.
Consider the latest year-to-date data pull from FactSet, containing YTD data as of the end of September:
Growth’s Struggle
The data show that last month, it was traditional value and growth ETFs—the original smart beta, if you will—that gathered the most assets, taking in nearly $4 billion in combined assets. What’s notable about that data point is the fact that September flows represent a shift in demand for growth strategies—even if from a performance perspective, there’s little reason to feel any differently about them.
Year-to-date, growth ETFs have actually been the least popular smart-beta segment, bleeding some $4.3 billion in assets.
(For more information, see our Smart-Beta ETF Channel)
The largest growth ETFs—the $30 billion iShares Russell 1000 Growth ETF (IWF), the $22 billion Vanguard Growth Index Fund (VUG) and the $14 billion iShares S&P 500 Growth ETF (IVW)—have all underperformed year-to-date relative to the SPDR S&P 500 (SPY) by as much as 2 percentage points in some cases:
Low Vol Winning Race
By contrast, the most popular smart-beta segment this year (missing from the table above) has been low volatility.
Low-vol ETFs have taken in $14.15 billion in net creations so far in 2016. What’s interesting here is that the intake pace has slowed down from earlier months. Still, as FactSet points out, the segment has “managed to hang on to much of their early year flows, showing the believers remain believers.”
Roughly half of those assets have landed into one fund, the iShares Edge MSCI Min Vol USA ETF (USMV). USMV has seen net creations now exceeding $6.3 billion year-to-date, making it one of the most popular ETFs this year, period.
The fund has delivered a modest outperformance relative to SPY:
Value & Dividend Success
Value and dividend ETFs have also done very well from the perspective of both popularity with investors and performance relative to the broad market. According to FactSet, these two segments have attracted roughly $23 billion in net inflows this year.
- The top value ETFs, including the $31 billion iShares Russell 1000 Value ETF (IWD), the $23 billion Vanguard Value Index Fund (VTV) and the $10 billion iShares S&P 500 Value ETF (IVE) have all outperformed SPY year-to-date by about 1-2% points.
- Among the largest dividend ETFs, the $22 billion Vanguard Dividend Appreciation Index Fund (VIG), the $16 billion iShares Select Dividend ETF (DVY) and the $14 billion SPDR S&P Dividend ETF (SDY) have shelled out twice as much as SPY’s returns, in some cases:
Charts courtesy of StockCharts.com
In all, the ETF market has now seen net inflows of about $160 billion year-to-date, and it remains to be seen “whether we’ll continue to see the ‘rising tide’ phenomenon in flows, where all classes of ETFs are equally growing, or whether we’ll go back to more cyclical rotation between sectors and asset classes,” according to FactSet research.
Contact Cinthia Murphy at [email protected]
