Stock-based ETFs are attracting the lion’s share of new money so far this year as major U.S. equity benchmarks such as the Dow Jones Industrial Average break out to new all-time highs.
First-quarter ETF flows illustrate that “capital has consistently looked to add risk” with 83% of all fresh cash, or $48.2 billion of $51.4 billion, going to equity funds, according to Nicholas Colas, ConvergEx Group chief market strategist. “Fixed income products as a whole aren’t catching much traction in 2013, with just $5 billion in new capital.”
In stocks, the most popular sector ETFs in the first quarter are real estate, financials and energy.
Elsewhere in the equity space, low-volatility ETFs are also hot, and fund providers are set to introduce more products. The iShares MSCI USA Minimum Volatility ETF (NYSEArca: USMV) and PowerShares S&P 500 Low Volatility Portfolio (NYSEArca: SPLV) have gathered $1.4 billion and $735 million, respectively, according to IndexUniverse flow data. [Low-Volatility ETFs: Strong Demand]
Meanwhile, gold ETFs have seen the largest outflows with SPDR Gold Shares (NYSEArca: GLD) and iShares Gold Trust (NYSEArca: IAU) losing a combined $6.9 billion.
“That’s 10,500 standard gold bars (400 ounces each), or 131 tons,” Colas said in a note. “Which is like selling down all the gold in either South Africa’s or Sweden’s central banks in less than 90 days.”
There are 1,435 ETFs listed in the U.S., while 19 new funds have launched so far this year while 30 have delisted. Total assets under management are $1.45 billion.
“U.S. listed ETFs are tearing it up when it comes to new capital flowing into the product,” Colas said, adding that daily inflows are about $970 million a day on average.
“The industry is too young to model out seasonality accurately – the proclivity for investors to add capital at specific periods of the year – so we’ll have to wait and see if the 2013 run rates hold,” the strategist wrote.
“Personally, I believe they will and the industry will end up gathering something more than $200 billion for 2013 as a whole. It is certainly off to a good start,” Colas said. “The rally in equities may leave mutual fund investors yawning with ennui, but ETF owners (to the degree these are two different buyers) are buying with both hands.”
Full disclosure: Tom Lydon’s clients own GLD.