This week the leader in exchange traded fund asset inflows (creation activity) thus far is iShares Russell 2000 (NYSEArca: IWM), taking in over $1.4 billion in new assets.
We find this ETF activity notable considering the recent instability in the equity markets themselves and daily volatility levels, as small cap stocks generally exhibit additional volatility and are inherently riskier than larger cap equity names.
That said, it is possible that a larger institutional player or players are intentionally making a tactical shift away from large cap equities and into smaller caps. In fact, the large cap iShares Russell 1000 (NYSEArca: IWB) has seen outflows to the tune of about $300 million this week.
We point out that small caps have severely lagged year to date compared to large, with IWM falling 15.22% versus IWB losing 8.19% year to date.
In the trailing one year period, IWM is down 1.98% versus IWB up 1.31%, and over a trailing five year period IWM is down 35.96% versus IWB falling 34.43%.
So it is clear that the bulk of this relative underperformance in small caps has occurred this year, and evidently fund managers expect small caps to gain ground on a relative basis versus large cap names.
Other ETFs in the Russell 2000 space that may see heightened activity are Rydex Russell 2000 Equal Weight (NYSEArca: EWRS) and Vanguard Russell 2000 (NasdaqGM: VTWO).
For those investors who are looking for a short term trading strategy on the long side of the Russell 2000, Direxion Small Cap Bull 3X (NYSEArca: TNA) offers 3 times daily leveraged exposure to the index itself.
iShares Russell 2000
For more information on Street One ETF research and ETF trade execution/liquidity services, contact pweisbruch@streetonefinancial.com.