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ETF Flows Continue Upward Trajectory; $100B Pace Seen in Q2
Traders Magazine Online News, June 14, 2017
Boom, zoom, to the Moon.
Exchange-traded funds (ETFs) continue their meteoric rise and usage among investors and after just two months into the second quarter, ETF flows are on pace to top $100 billion for the third straight quarter. Both equity and fixed income ETFs have attracted over $20 billion in cash and $10.7 billion, respectively in May, according to the most recent U.S. ETF Flash Flows report from State Street Global Advisors.
SSGA noted in the report that equity ETFs have now recorded seven consecutive months with over $20 billion of inflows.
Matthew Bartolini
“2017 continues to be a banner year for ETFs,” began Matthew Bartolini, Head of SPDR Americas Research at SSGA. “First quarter flows notched a new all-time high, and now two months into Q2, flows are on pace to top $100 billion for the third straight quarter. From a headline perspective, it may look as if equity ETFs are the key cog in this well-oiled machine.”
In looking deeper into the numbers, Bartolini noted that while impressive, the $20 billion of flows amassed over the last month would have been halved, if it were not for the $10 billion plus of ETF inflows that occurred in the last five days of May. And while this $10 billion was deposited into equities over the final days of the month, U.S. focused funds were the beneficiary of 99% of that total.
“This frenetic action underscores the unpredictability of this current market, where sentiment ebbs and flows with each tweet,” he said.
But just as important as equity ETFs, and certainly not to be left out, are bond backed funds. In four of the last five months, bond ETFs have posted double digit monthly fund inflows.
“However, while their (equity) flows are impressive, fixed income is once again the little engine that could,” Bartolini said. “The steady fashion in which investors are allocating towards fixed income ETFs indicates that market dynamics, while important, are playing less of role, and investors are gravitating towards the structure as way to obtain bond exposure.”
So where in equities is all the cash going?
“May flows are not just a U.S. story; rather the protagonist comes from across the Pond,” Bartolini explained. “International exposures have been all the rage in 2017, taking in over $60 billion to date, or essentially half of the year’s totals for the equity category, even though those funds only equate to just 26% of overall assets.”
But the real story is where on the international scale those flows are going, he added. Europe has been of interest, with over $9 billion deposited in just the last three months alone. And this extends beyond just ETFs. Citing Morningstar data, Bartolini said emerging market focused ETFs and mutual funds have recorded inflows for 21 consecutive weeks – their best run since 2012 when they eclipsed 25 straight weeks.
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