Exchange-traded funds backed by equities saw outflows of $16 billion in January, while fixed income backed ETFs benefited.
According to latest U.S ETF Flash Flows report from State Street Global Advisors (SSGA), the drop in equity ETF holdings was due to the confluence of concerns around oil, China, and the potential threat of a global recession. As a result, ETF investors sought out other asset classes such as U.S. Treasuries and gold in January.
In the report, SSGA noted that equity ETFs saw outflows of approximately $16 billion as fixed income ETFs attracted over $13 billion of inflows. Financial and Technology ETFs saw outflows of $2.4 billion and $2.6 billion respectively, while defensive sectors such as Utilities ($916 million) and Consumer Staples ($661 million) attracted inflows.
Even as markets rebounded, volatility continued to remain elevated as the VIX Index averaged 15% above its long term trend, wrote David Mazza, SSGAs head of research, SPDR ETFs and SSGA funds. Additionally, U.S. equities had more days last month with intraday moves of at least 2% than in nearly each of 2012, 2013, and 2014. As a result, it is not surprising to see fixed income exposures garner an overwhelming amount of flows, as investors sought out potential principal protection over capital appreciation.
Across all ETF sectors, energy ETFs brought in the most money in January, accumulating $1.1 billion of inflows.
Investors rotated into gold backed ETFs to start 2016, as precious metals ETFs attracted $1.2 billion of inflows during the month.
