Surging Rates Don't Deter ETF Investors

Investors added $5.7 billion to U.S.-listed ETFs, even as interest rates in the U.S. spiked to multiyear highs.

Sumit Roy

Senior ETF Analyst

Oct 05, 2018

Reviewed by: Sumit Roy

Edited by: Sumit Roy

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ETF inflows continued at a brisk pace during the first week of October. On net, $5.7 billion entered U.S.-listed ETFs during the week ending Thursday, Oct. 4, according to FactSet. Year-to-date inflows now stand at just shy of $210 billion.

Unlike previous weeks, when U.S. equity ETFs took in the lion’s share of new money, inflows were more evenly split this time around. U.S. equity ETFs picked up a solid $2.3 billion, but international equity ETFs also had respectable inflows of $2 billion.

Even U.S. and international fixed-income ETFs registered a combined $1.2 billion of inflows despite surging interest rates. The benchmark 10-year Treasury yield hit a seven-year high of 3.25% this week thanks to strong economic data.

Bargain Buying In Small Caps & Junks Bonds

Taking the No. 1 spot on the daily inflows list was the iShares Russell 2000 ETF (IWM), with creations of $1.4 billion. Small-caps notably underperformed their large-cap counterparts this week, which may have prompted bargain buyers to pick up shares of IWM.

IWM is currently up 7.4% year-to-date, compared with 9.4% for competing S&P 500 funds.

Similarly, the iShares iBoxx USD High Yield Corporate Bond ETF (HYG) sold off as interest rates hit multiyear highs this week; nevertheless, investors poured $1.3 billion into the fund.

On the other hand, the Invesco QQQ Trust (QQQ) and the iShares 20+ Year Treasury Bond ETF (TLT) weren’t so fortunate. Investors soured on both the tech-heavy equity ETF and the long-term Treasury bond ETF, pulling about $1.6 billion from each of them.

For a full list of this week’s top inflows and outflows, see the tables below:

Top 10 Creations (All ETFs)

Ticker	Name	Net Flows ($,mm)	AUM ($, mm)	AUM % Change
IWM	iShares Russell 2000 ETF	1,421.66	50,494.46	2.90%
HYG	iShares iBoxx USD High Yield Corporate Bond ETF	1,325.21	16,019.79	9.02%
DIA	SPDR Dow Jones Industrial Average ETF Trust	839.13	23,251.16	3.74%
FBT	First Trust NYSE Arca Biotechnology Index Fund	793.21	3,449.67	29.86%
IVV	iShares Core S&P 500 ETF	764.16	166,551.52	0.46%
IEFA	iShares Core MSCI EAFE ETF	667.28	59,495.81	1.13%
VEA	Vanguard FTSE Developed Markets ETF	602.98	71,373.30	0.85%
XLC	Communication Services Select Sector SPDR Fund	587.22	2,462.48	31.31%
MTUM	iShares Edge MSCI U.S.A. Momentum Factor ETF	512.17	11,035.12	4.87%
XLI	Industrial Select Sector SPDR Fund	431.31	13,430.94	3.32%

Top 10 Redemptions (All ETFs)

Ticker	Name	Net Flows ($,mm)	AUM ($, mm)	AUM % Change
QQQ	Invesco QQQ Trust	-1,673.44	72,224.95	-2.26%
TLT	iShares 20+ Year Treasury Bond ETF	-1,598.27	7,944.25	-16.75%
FTXO	First Trust Nasdaq Bank ETF	-828.58	366.14	-69.35%
IYR	iShares U.S. Real Estate ETF	-690.36	3,781.98	-15.44%
XLY	Consumer Discretionary Select Sector SPDR Fund	-541.05	15,367.77	-3.40%
VO	Vanguard Mid-Cap ETF	-504.00	24,512.03	-2.01%
TIP	iShares TIPS Bond ETF	-452.41	23,265.62	-1.91%
XLV	Health Care Select Sector SPDR Fund	-431.38	19,611.35	-2.15%
GLD	SPDR Gold Trust	-408.07	28,245.26	-1.42%
IEF	iShares 7-10 Year Treasury Bond ETF	-332.62	8,686.07	-3.69%

ETF Weekly Flows By Asset Class

	Net Flows ($, mm)	AUM ($, mm)	% of AUM
U.S. Equity	2,331.41	2,179,625.39	0.11%
International Equity	2,032.42	792,215.37	0.26%
U.S. Fixed Income	742.77	566,885.83	0.13%
International Fixed Income	477.94	65,619.63	0.73%
Commodities	-219.21	60,360.11	-0.36%
Currency	-0.00	1,089.12	-0.00%
Leveraged	123.65	38,222.59	0.32%
Inverse	273.14	13,079.65	2.09%
Asset Allocation	-15.52	9,471.65	-0.16%
Alternatives	-50.26	4,780.83	-1.05%
Total:	5,696.35	3,731,350.17	0.15%

Asset Classes (Year-to-Date)

	Net Flows ($, mm)	AUM ($, mm)	% of AUM
U.S. Equity	97,811.58	2,179,625.39	4.49%
International Equity	37,724.05	792,215.37	4.76%
U.S. Fixed Income	58,457.77	566,885.83	10.31%
International Fixed Income	9,893.85	65,619.63	15.08%
Commodities	-1,568.58	60,360.11	-2.60%
Currency	-92.76	1,089.12	-8.52%
Leveraged	3,396.22	38,222.59	8.89%
Inverse	2,883.32	13,079.65	22.04%
Asset Allocation	666.87	9,471.65	7.04%
Alternatives	693.46	4,780.83	14.51%
Total:	209,865.79	3,731,350.17	5.62%

Top 10 Volume Surprises, Funds >$50 mm AUM

Ticker	Name	Average Volume (30 Day)	1 Week Average Volume	% of Average
QVAL	Alpha Architect U.S. Quantitative Value ETF	11,312	53,619	474.02%
IMTB	iShares Core 5-10 Year USD Bond ETF	13,596	60,444	444.57%
WOOD	iShares Global Timber & Forestry ETF	31,415	122,302	389.30%
AGZ	iShares Agency Bond ETF	16,386	53,627	327.27%
JPMF	JPMorgan Managed Futures Strategy ETF	1,168	3,462	296.28%
DVP	Deep Value ETF	16,606	46,637	280.84%
FALN	iShares Fallen Angels USD Bond ETF	17,189	45,720	265.99%
DVYE	iShares Emerging Markets Dividend ETF	81,103	213,245	262.93%
PXLV	Invesco Russell Top 200 Pure Value ETF	17,050	41,862	245.53%
HTRB	Hartford Total Return Bond ETF	242	561	231.89%

Disclaimer: All data as of 6 a.m. Eastern time the date the article is published. Data is believed to be accurate; however, transient market data is often subject to subsequent revision and correction by the exchanges.

Sumit Roy

| Contact: [email protected]

Sumit Roy is the senior ETF analyst for etf.com, where he has worked for 13 years. He creates a variety of content for the platform, including news articles, analysis pieces, videos and podcasts.

Before joining etf.com, Sumit was the managing editor and commodities analyst for Hard Assets Investor. In those roles, he was responsible for most of the operations of HAI, a website dedicated to education about commodities investing.

Though he still closely follows the commodities beat, Sumit covers a much broader assortment of topics for etf.com, with a particular focus on stock and bond exchange-traded funds.

He is the host of etf.com’s Talk ETFs, a popular video series that features weekly interviews with thought leaders in the ETF industry. Sumit is also co-host of Exchange Traded Fridays, etf.com’s weekly podcast series.

He lives in the San Francisco Bay Area, where he enjoys climbing the city’s steep hills, playing chess and snowboarding in Lake Tahoe.

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Surging Rates Don't Deter ETF Investors

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