August ETF Themes

A survey of recent industry reports highlights a few investment themes as reflected in ETF flows in August.

According to Blackrock figures, a record of $15 bln left ETFs globally in August. About a third was accounted for by bond funds, though the story get complicated as one drills down. As it turns out, Blackrock’s figures suggest about $8 bln left long-term bond funds, but about $2.8 bln went into short-term fixed income ETFs.

U.S. equity ETFs experienced a net outflow of about $14 bln, nearly all of which was accounted for by SPY.  Still, U.S. equity ETFs have seen more inflows in the first eight months of the year than all of last year.   Separately, ICI noted that US equity mutual funds reported an outflows of about $790 mln in the first three weeks of August, trimming the $13 bln inflows of the Jan-July period.

Some of these funds appeared to shift toward European ETFs, which saw a record inflow of $4.7 bln in August.  We note that the Dow Jones Stoxx 600 slipped 0.75% over the month.  The S&P 500 fell 2.5% last month.

Flows and performance did not align with gold.  Gold ETFs saw a n outflow of about $690 mln, but spot prices rose about 6% over the course of the month.  In the year-to-date, roughly $31 bln has left gold ETFs.  More broadly speaking, according to ETF Trends, 20 of the top performing 25 non-leveraged ETFs were linked to commodities last month.  It will be interesting to see if flows chase returns in the period ahead.

Another thematic development has been the interest in international ETFs that hedge the currency risk.  North American-based international ETFs that hedge fx risk have seen a net inflow of about $22 bln this year (to $32.5 bln).  While Wisdom Tree’s Japan hedged equity fund has been particularly popular, there, a few new funds have been launched in the past few months that have also attracted inflows.  Franklin Templeton launched a global bond funds last week that hedges the US-Canadian dollar foreign exchange exposure.  In May Vanguard launched an emerging market bond fund that hedges the currency exposure.

North American-based international funds that do not hedge currency risk have seen a 6% increase assets under management, according to Bloomberg figures.

 

This piece is cross-posted from Marc to Market with permission.