April showers failed to dampen investor spirits when it came to pouring cash into equity exchange traded funds (ETFs).
Fresh off the greatest quarter of all time, ETF flows maintained their momentum in April as the final week of the month saw investors deposit over $21 billion in equity funds, or 87% of the months total inflows, according to the latest US ETF Flash Flows report from State Street Global Advisors. This marks the sixth consecutive month that inflows topped $20 billion into equity ETFs.
Once again, much like we saw in the US in November, equity flows were buoyed by a renewed sense of risk-on sentiment after an election result, underscoring how politics and policy – and not profits – have had a much larger impact on the markets trajectory in this New Abnormal, Matthew Bartolini, Head of SPDR Americas Research at State Street Global Advisors, told Traders Magazine.
He added that boring bonds continue to make headlines and break records too.
Not to be forgotten, fixed income ETFs are also a force to be reckoned with as these securities saw better than $45 billion in flows over the first quarter. This growth rate is approximately 50% of all total inflows for 2016. 2016 saw a record $91 billion get moved into fixed income ETFs overall.
The fervent interest in fixed income allocations comes at a time when questions over long term growth and inflationary prospects have kept yields constrained, with the US 10 year yield falling 10 basis points during the month and hovering near 2.30 percent, Bartolini said. With such a backdrop investors continued to search for income, as well as a potential diversifier if the equity rally does grind to a halt.
On the sector level, Materials, which received a boost in sentiment after the Trump administration indicated there will be a renewed sense of purpose on infrastructure spending, led all sectors in outflows last month, as investors withdrew approximately $3 billion. Financial ETFs also saw outflows in April of approximately $900 million. Utilities ETFs remained in favor, attracting over $530 million during the month and Technology funds attracted nearly $500 million of inflows;
Precious metal ETFs, led by gold-backed funds, attracted over $1.1 billion in April, after posting outflows in March. But the month of April is not an American story; rather it is one that should be internationally known. Not since May and June of 2015 have international funds outpaced US funds in terms of inflows in back to back months. And the interest this April was widespread, with only 17 out of the 159 funds within the international-broad category having outflows during the month.
But ETF growth wasnt just a North American story in April, rather it is one that should be internationally known. Bartolini said that not since May and June of 2015 have international funds outpaced US funds in terms of inflows in back to back months.
And the interest this April was widespread, with only 17 out of the 159 funds within the international-broad category having outflows during the month, he said.
Diving deeper, the regional focused fund flows were once again driven by European exposures, which amassed over $2 billion, after accumulating $1.8 billion in the month of March – a complete 180 from the activity in January and February when those funds were in net outflows, and a potential indication that investors are looking elsewhere for growth.