ETF Trends
ETF Trends

In the past several weeks, we have seen assets flee the immensely popular SPDR Gold Shares (NYSEArca: GLD), and last week the fund topped all ETFs in terms of net assets leaving via redemption activity. More than $650 million vacated the fund last week alone, and the trend has leaned towards redemptions in the recent past as Gold prices have floundered compared to their highs earlier this year.

GLD remains below its 50 day moving average, having met resistance there on several occasions since early June. Interestingly, a competing fund in the space, iShares Gold Trust (NYSEArca: IAU) has not experienced the same level of outflows as peer GLD, although the two funds have very different asset levels at the moment (GLD currently has $63.5 billion in AUM versus IAU’s $9.2 billion).

It is possible, that a phenomenon that we first observed a little over two years ago, is still reoccurring on a gradual but systematic basis, and those are institutional “swaps” away from GLD and into IAU. For one will notice that even though GLD trades more volume on a daily basis than IAU, the two funds are materially the same and IAU has delivered stronger live performance to the price of spot Gold bullion than has GLD (YTD, IAU +1.25% versus GLD up 1.11%) and since IAU’s inception in 2004, the fund has rallied 261.20% versus GLD’s 243.16%.

Additionally, we believe that larger institutions as well as investment advisory firms, after becoming comfortable with live performance data that is available over longer periods of time in ETFs (such as 3 and 5 year benchmarks and longer when available), strategically will look to make intelligent “swaps” within their ETF portfolios (sensitive to tax purposes of course) especially when they can capture some kind of savings in terms of management fees.

It is no secret that iShares’ IAU offers a lower expense ratio than the giant GLD, charging investors only 25 basis points versus GLD’s 40 basis points. That said, with Gold prices hovering near their lowest levels of 2012, we may very well be witnessing the beginning of tax loss harvesting in GLD while some investors push assets into the cheaper and seemingly more efficient in terms of returns to spot Gold, IAU.

iShares Gold Trust (IAU)

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