After a sluggish start to the year, inflows to exchange traded products are showing signs of life in the second quarter with the top-10 asset gainers including bond, emerging markets and sector funds.
“After a very choppy first quarter of 2014, U.S. listed exchange traded funds have found their footing through the first half of Q2. Overall inflows into ETFs total $21.2 billion through May 16th; the whole first quarter was just $15 billion,” said Nicholas Colas, chief market strategist at ConvergEx Group, a global brokerage company based in New York.
With the SPDR S&P 500 ETF (NYSEArca: SPY) struggling to keep cash in the first quarter, inflows to equity ETFs in the first three months of the year were nearly non-existent. That trend has reversed this quarter with equity-based ETFs gaining $12.5 billion, or 59%, of this quarter’s inflows, according to ConvergEx.
The pace picked up in April when investors poured more than $15 billion into ETFs, despite cash departing SPY, the PowerShares QQQ (NasdaqGM: QQQ) and other marquee products. [April: A Good Month for ETF Inflows]
“Where’s the balance of the capital moving in 2014? Yep – fixed income, a.k.a. the most unloved asset class of late 2013. Total inflows for the quarter to date are $6.9 billion or 33% of fresh ETF money for Q2 2014. As for “Hot” industry sectors, in Q2 it is one-stop-shop: Energy, with $3.4 billion in inflows versus Financials (negative $1.1 billion) and Consumer Cyclicals (negative $1.4 billion). In short, ETF money flows to date do a great job of describing an almost Augustinian investor sentiment: give me some serious equity exposure, but not just yet,” said Colas.
Global ETFs have been among the most prodigious asset gatherers since the start of April. In fact, no ETF has raked in more cash than the almost $4.7 billion hauled in by the iShares MSCI Emerging Markets ETF (NYSEArca: EEM), the second-largest emerging markets ETF. [Flows Show Uptick in Risk Appetite]
The Vanguard FTSE Developed Markets ETF (NYSEArca: VEA) and the Vanguard FTSE Europe ETF (NYSEArca: VGK) have seen combined second-quarter inflows of over $2 billion.