ETF research providers Morningstar, IndexUniverse and BlackRock all sent out news releases this week with the same message that investors bolted ETFs in record numbers in August.
Different accounting measures means some of the specific numbers vary depending on the source, but the overall takeaway is that the venerable SPDR S&P 500 ETF (SPY), as well as ETFs focused on fixed income and emerging markets, got whacked by outflows. On the other hand, investors fell in love with Europe-focused ETFs.
Fears of rising interest rates in the post-QE world caused investors to flee bond funds with longer durations, but Morningstar analyst Michael Rawson noted in a report that investors continued to invest in funds focused on shorter-duration bonds. One such ETF, the PowerShares Senior Loan Portfolio fund (BKLN), gained $345 million in assets last month. He also noted that the iShares Floating Rate Bond ETF (FLOT) gained $288 million in assets.
Among winners on the equity side, Rawson said the PowerShares Buyback Achievers Portfolio fund (PKW) had inflows of $273 million in August and nearly $1 billion year-to-date.
Rawson wrote that ETF and mutual fund investors had divergent views regarding emerging markets. The former, which he said has a higher proportion of institutional investors, pulled money out of this sector while the latter, which are largely owned by retail investors, put money into them.
Among the largest ETF providers, Morningstar data show that the top two players––iShares and State Street Global Advisors––saw hefty outflows, while number three Vanguard experienced healthy inflows during August.
State Street was hurt by withdrawals from the SPY fund, which according to IndexUniverse had massive outflows of $14 billion last month.
Vanguard was aided by $1.5 billion of new money in the Vanguard FTSE Europe ETF (VGK), which IndexUniverse said placed it second on the inflows chart for August behind only the $2.2 billion that went into the iShares Core S&P Mid-Cap ETF (IJH).
Overall, IndexUniverse says investors pulled more than $17 billion out of U.S.-listed ETFs last month, which caused total U.S.-listed ETF assets to dip to $1.487 trillion from $1.534 trillion in July. Through August, the U.S. ETF industry has garnered $94 billion in assets versus nearly $99 billion in the year-earlier period. Investors shoveled a record $188 billion into U.S. ETFs in 2012.
ETFs might be in for another topsy-turvy month in September. As noted in a BlackRock report that said global exchange-traded products experienced record outflows of $15 billion last month, investors can expect more volatility in stocks and bonds due to continued uncertainty about the Fed’s fiscal stimulus tapering, the direction of economic data and the possibility of geopolitical conflict.