September 3, 2013

Ouch: ETP Outflows Hit $15B in August

Investors pulled $14 billion out of holdings in the SPDR S&P 500, according to the latest BlackRock research

Concerns over Federal Reserve policy and economic growth prompted global investors to pull $15 billion from exchange-traded products in August, according to data released by BlackRock on Monday. This tops outflows of $13.4 billion in January 2010, the industry’s previous record.

The August outflows also surpassed the $12 billion of redemptions made by investors in June. Plus, it marked a dramatic reversal from the nearly $44 billion of inflows investors made in July. (In August 2012, investors added $12 billion of flows to exchange-traded products.)

“Similar to June, outflows were driven by fixed income with -$5.3 billion, including -$8.1 billion from funds with longer/broader maturity profiles vs. inflows for short maturity funds,” Dodd Kittsley and Raj Seshadri wrote.

Still, there were some bright spots. Nearly $5 billion flowed into pan-European equity ETPs in August.

U.S. equity products, however, experienced $14.5 billion in outflows, $14 billion of which were redeemed from the SPDR S&P 500 (SPY).

Year to date, investors have added $128 billion of inflows to exchange-traded products, with equity ETPs dominating the pack. In the first eight months of 2012, though, overall ETP inflows were nearly $140 billion.

Total assets in exchange-traded products are roughly $2.11 trillion, BlackRock estimates, down from $2.16 trillion in July but up from $1.76 trillion a year ago.

As investors adjusted to rising interest rates, they moved almost $3 billion into short-maturity fixed-income ETPs in August and $52 billion into money-market funds.

“Investors could also be positioning for increased market volatility in September," noted Kittsley and Seshadri. "There are a number of upcoming events and announcements with implications for the global economy including the release of U.S. nonfarm payroll numbers ahead of the highly anticipated next meeting of the Federal Open Market Committee, the German elections, meetings of other major central banks, U.S. debt ceiling negotiations and the escalating conflict in Syria.”

Winners and Losers

Year to date, some ETPs with the largest inflows include:

  • WisdomTree Japan Hedged Equity Fund (DXJ), $8.4 billion
  • iShares MSCI Japan (EWJ), $4.7 billion
  • iShares Russell 2000 (IWM), $4.5 billion
  • Vanguard Total Stock Market (VTI), $4.3 billion
  • Vanguard Short-Term Bond (BSV), $4.1 billion

ETPs with significant outflows include:

  • SPDR Gold (GLD), -$20.1 billion
  • iShares MSCI Emerging Markets (EEM), -$8.2 billion
  • iShares BOXX $ Investment Grade Corporate Bond (LQD), -$6.2 billion
  • iShares Barclays TIPS Bond (TIP), -$6.2 billion
  • SPDR S&P 500 (SPY), -$4.8 billion

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