Last year was a memorable one for inflows to exchange traded products . Inflows reached a record $247.3 billion, marking the second consecutive year the number was above $200 billion.
Looked at another way, last year’s ETF inflows amounted to almost one Johnson & Johnson (NYSE: JNJ) as J&J’s current market cap is $251 billion. But last year was, well, last year and 2014, still in its nascent stages, has brought an almost foreign concept into the ETF conversation: Outflows. [Banner Year for ETF Inflows in 2013]
“The global equity market’s newfound volatility seems to have had a novel impact on investors: Money flows related to U.S. listed exchange traded funds are actually negative for the year-to-date and will likely end up in the red for the month of January. While not quite white-rhino rare, we are so accustomed to ETFs,” says Nicholas Colas, chief market strategist at ConvergEx Group, a global brokerage company based in New York.
Colas notes that through Tuesday, investors had pulled a net $8.5 billion from U.S.-listed ETFs. The list of worst offenders is not surprising and includes the SPDR S&P 500 (NYSEArca: SPY), iShares Russell 2000 ETF (NYSEArca: IWM), iShares MSCI Emerging Markets ETF (NYSEArca: EEM) and the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO), according to ConvergEx.
EEM and VWO, two of last year’s 10 worst outflow offenders, have already lost more than $7 billion in assets combined this year.
“What makes those names important is their status as liquidity vehicles. For lack of a better term, they can act as the ShamWow (highly absorbent towel, for those of you not in the U.S.) of capital markets liquidity. They soak up excess capital in this case the money which investors wanted to put to work quickly late last year and then release it once those same asset owners decide exactly where to put it,” notes Colas.
Of the $8.5 billion investors have pulled from U.S.-listed ETFs since the start of 2014, $7.6 billion has come out of equity funds while bond funds are lighter by $247 million. Despite improve price action in gold, commodities have shed $624 million, according to ConvergEx data.
Vanguard FTSE Emerging Markets ETF
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of SPY, IWM and EEM.