Midyear ETF Flows Set New Record Of $101B

Midyear ETF Flows Set New Record Of $101B

The first half was a story of investors jumping into international stocks and out of the U.S.

Managing Editor
Reviewed by: Olly Ludwig
Edited by: Olly Ludwig

International equities, and currency-hedged strategies in particular, dominated ETF inflows in the first half of 2015. Net inflows totaled a record $101 billion, and total U.S.-listed ETF assets stood at $2.118 trillion at the end of June—6 percent higher than at the end of 2014, and 14 percent higher than a year ago.

Currency hedging has been all the rage, as we’ve writing about all year, with the most popular ETF being the eurozone-focused WisdomTree Europe Hedged Equity Fund (HEDJ | B-45). HEDJ has pulled in almost $14 billion so far this year, lifting its assets to nearly $20 billion, according to data compiled by ETF.com.

For U.S. investors grappling with dollar strength, funds like HEDJ have protected solid returns, up more than 14 percent this year. Without that currency hedge that peels out euro weakness, a fund with HEDJ’s holdings would have returned less than 6 percent. HEDJ is also far outperforming the U.S. broad market: The SPDR S&P 500 (SPY | A-98) is barely above zero through June 30.

2015 First Half Flows By Asset

Net Flows ($M)AUM ($M)% of AUM
U.S. Equity-17,666.491,155,775.66-1.53%
International Equity90,161.54525,646.5917.15%
U.S. Fixed Income20,130.83300,073.346.71%
International Fixed Income3,109.4726,331.4911.81%
Asset Allocation839.485,874.7814.29%
Total101,374.01 2,118,016.67 4.79%

2015 First Half Top Gainers

TickerFundIssuerFlowsAUM ($M)Turnover
HEDJWisdomTree Europe Hedged EquityWisdomTree13,969.8119,765.1544,687.00
DBEFDeutsche X-trackers MSCI EAFE Hedged Equity ETFDeutsche Bank10,456.7412,153.9816,993.59
EFAiShares MSCI EAFEBlackRock5,884.6960,941.33155,826.69
VTIVanguard Total Stock MarketVanguard4,770.3756,151.7937,947.94
VOOVanguard S&P 500Vanguard4,671.3732,281.7140,502.27
DXJWisdomTree Japan Hedged EquityWisdomTree4,180.8118,153.8637,841.97
EWJiShares MSCI JapanBlackRock3,239.8819,591.2749,861.20
VGKVanguard FTSE EuropeVanguard2,777.3214,242.7536,627.96
EWGiShares MSCI GermanyBlackRock2,707.507,178.7421,649.57
HEFAiShares Currency Hedged MSCI EAFEBlackRock2,659.032,719.084,831.87

Into International, Out Of US

In sum, ETFs focused on international equities gathered more than $90 billion, while those targeting U.S. equities bled almost $18 billion.

That divergence is the latest evidence that a big asset-flow shift is taking place this year. Investors are clearly moving out of the U.S., which led the global economy out of the financial crisis since the market bottomed on March 9, 2009.

Instead, investors are placing hopes on areas like Europe, where growth is returning and central banks are still pursuing ultra-easy monetary policies.

Twenty-two years after the launch of the now-$177 billion SPY—the first U.S.-listed exchange-traded fund—the world of ETFs is steadily coming out of the shadows and onto center stage of global investment markets. Global ETF assets now almost match the $3 trillion in hedge funds and, on the horizon, it’s no longer folly to imagine a world in which ETF assets exceed the more than $16 trillion now invested in open-end mutual funds.

Outflows From US Equities

SPY, by the way, was the least popular ETF in the first half of 2015, suffering outflows of more than $45 billion—making it the main reason U.S. equities as a whole had almost $18 billion in redemptions. SPY was also at the top of the “Biggest Outflows” tables of June and second-quarter flows.

SPY, which occupies a unique place in the ETF firmament as both a trading tool and a long-term holding for buy-and-hold investors, is something of a canary in the coal mine in the so-called ETF ecosystem. As such, the world’s biggest ETF was also the least popular fund in the first quarter, the second quarter and in the month of June.

Beyond SPY, nine of the 10 funds on our biggest outflows list were U.S.-focused equity funds. Those included many of the biggest and most popular funds, such as SPY’s sibling, the iShares Core S&P 500 ETF (IVV | A-99). Also on the top redemptions list were the Nasdaq-100 ETF, the PowerShares QQQ Trust (QQQ | A-65) as well as a slew of U.S. sector funds, including the Financial Select Sector SPDR Fund (XLF | A-89).

2015 First Half Biggest Losers

TickerFundIssuerFlowsAUM ($M)Turnover
SPYSPDR S&P 500SSgA-45,178.88170,512.093,088,026.74
EEMiShares MSCI Emerging MarketsBlackRock-3,471.5429,120.14259,777.71
IVViShares Core S&P 500BlackRock-3,138.0467,763.66103,480.01
QQQPowerShares QQQInvesco PowerShares-2,967.9338,792.24395,005.81
XLPConsumer Staples Select SPDRSSgA-2,614.757,209.9446,735.77
XLFFinancial Select SPDRSSgA-2,046.3918,834.9399,431.03
DIASPDR Dow Jones Industrial Average TrustSSgA-1,914.9811,036.56123,552.38
XLIIndustrial Select SPDRSSgA-1,696.237,211.4664,517.32
IWMiShares Russell 2000BlackRock-1,683.0429,527.21473,150.36
IYWiShares U.S. TechnologyBlackRock-1,675.892,985.196,491.85

End Of A Trend?

Conversely, as noted, currency-hedged strategies like WisdomTree’s HEDJ and the Deutsche X-trackers MSCI EAFE Hedged Equity ETF (DBEF | B-63) have consistently been among the most popular funds in the first quarter, the second quarter and in the month of June.

That said, it’s worth noting that in June, both DBEF and HEDJ were toward the bottom of the Top 10 inflows list—they have been at the top of the inflows lists in the first several months of 2015—suggesting the currency-hedging trend, if not the shift into international equities, may be starting to cool off.

2015 First Half League Table

IssuerNet FlowsAUM ($M)% of AUMTurnover
Invesco PowerShares-678.4897,442.41-0.70%464,089.72
First Trust9,037.3743,346.5920.85%50,589.26
Charles Schwab7,110.0634,252.7520.76%28,901.77
Van Eck2,326.1522,681.1110.26%250,439.03
Deutsche Bank13,317.1718,619.4871.52%38,957.98
Barclays Capital791.039,168.318.63%160,087.27
Northern Trust192.018,862.032.17%3,544.69
Global X509.563,989.1712.77%5,857.04
US Commodity Funds764.883,810.1320.07%84,882.31
Exchange Traded Concepts355.082,461.5614.43%1,183.30
ETF Securities-105.552,268.14-4.65%1,700.77
Credit Suisse69.381,785.953.88%987.18
Emerging Global Shares-121.511,518.67-8.00%1,591.42
Factor Advisor1,030.001,210.4985.09%2,639.15
Merrill Lynch4.66855.860.54%664.55
RBS Securities58.56812.847.20%798.19
Highland Capital Management33.40344.039.71%218.02
Arrow Investment Advisors87.60232.5937.66%273.41
Goldman Sachs-164.200.00%238.87
Morgan Stanley-90.790.00%42.89
Huntington Strategy Shares-5.7313.19-43.40%19.41
Pax World----

Olly Ludwig is the former managing editor of etf.com. Previously, he was a financial advisor at Morgan Stanley Smith Barney and an editor at Bloomberg News. Before that, Ludwig was a journalist at the Reuters News Agency in New York.