ETF Chart of the Day: U.S. Small-Cap Stocks

March 6th at 2:00pm by Paul Weisbruch, Street One Financial

Equity exchange traded funds that are tied to the Russell 2000 Index have seen an acceleration in outflows in recent sessions, and one of the largest ETFs out there in terms of assets under management, iShares Russell 2000 (NYSEArca: IWM), has lost nearly 8% of its total assets outstanding (approximately $1.2 billion) via redemption activity.

Similarly, a leveraged product that is designed to deliver twice the daily returns of the Russell 2000 Index, ProShares Ultra Russell 2000 (NYSEArca: UWM), has also seen considerable redemption activity as well as heightened trading volume, and about 20% of the total assets outstanding in the fund have vacated the ETF in recent sessions.

The Russell 2000 Index has given back some ground recently off of recent highs that were touched several weeks ago, and yesterday earlier in the session, the index touched its lowest point since the beginning of February before recovering somewhat.

IWM nearly touched its 50 day moving average (currently $78.95) intraday yesterday, an average that has not been violated since mid-December of last year. Small caps have lagged the large cap U.S. equity space, as we note that in the trailing one year period, the Russell 2000 Index is down 2.58% versus the S&P 500 Index up 3.23%, and year to date, the Russell 2000 is only narrowly outpacing the S&P 500, up 9.01% versus the S&P 500 up 8.96%.

It is possible that long holders have become anxious about IWM’s recent flagging performance and are simply taking some cash off of the table and reallocating to other areas of the markets.

Other funds that are variants of the Russell 2000 Index that may see a pick-up in activity given the recent flows include Vanguard Russell 2000 (NasdaqGM: VTWO) and Guggenheim Russell 2000 Equal Weight (NYSEArca: EWRS). Additionally, those looking to potentially play small caps from the short side, may find appeal in Direxion Daily Small Cap Bear 3X (NYSEArca: TZA), which delivers 3 times daily leveraged exposure to the Russell 2000 Index and is the largest “short” Russell fund in the category with just shy of $1 billion in assets under management.

TZA has seen very heavy trading volumes compared to average for at least the past 6 sessions. Similarly, ProShares Short Russell 2000 (NYSEArca: RWM) is designed to deliver the inverse daily return (unleveraged) to the Russell 2000 Index, while ProShares UltraShort Russell 2000 (NYSEArca: TWM) provides two times the daily leveraged inverse return. ProShares UltraPro Short Russell 2000 (NYSEArca: SRTY) is structured in a similar fashion as TZA, designed to provide 3 times the daily leveraged inverse return to the index.

Finally, iPath Short Extended Russell 2000 Total Return ETN (NYSEArca: RTSA) provides 3 times the inverse return but in ETN form.

Russell 2000 Index

For more information on Street One ETF research and ETF trade execution/liquidity services, contact pweisbruch@streetonefinancial.com.

Tickers

IWM