August was not kind to the exchange traded products industry, broadly speaking. The global ETP industry saw outflows of $15 billion in August, the second month of redemptions this year, according to data from BlackRock, parent company of iShares, the world’s largest ETF sponsor.
“This is the largest monthly outflow on record for global ETPs in terms of gross assets, however the outflow represents only 0.7% of global ETP assets,” the firm said. “The previous monthly record for global ETP outflows was in January 2010, when the industry witnessed outflows of $13.4 billion, representing an outflow of 1.2% of total assets at the time.” [Global ETFs See Record Outflows]
BlackRock also said talk of tapering of the Federal Reserve’s quantitative easing program sparked outflows of $3.5 billion from emerging markets, but developing world bond funds were particularly hard hit in August. Emerging-market bond funds, for instance, have seen 14 straight weeks of outflows, with investors withdrawing $4.56 billion in August alone, reports Erin McCarthy for the Wall Street Journal, citing EPFR Global data.
Late last month, the Journal reported that since the start of June, retail investors have pulled $18.1 billion from emerging-market bond funds, about one-third of the amount they had put in since the financial crisis. Additionally, the pace of redemptions in emerging markets bond funds by retail investors was nearly double that of their professional counterparts. [Retail Investors Dumping EM Bond ETFs Faster Than Pros]
Sliding currencies in the developing world have also sent investors running out of emerging markets debt funds, but the outflows have not been contained to the dollar-denominated issues. Tumbling currencies from Brazil to Turkey to South Africa prompted investors to pull $72.7 million from the Market Vectors Emerging Markets Local Currency Bond ETF (NYSEArca: EMLC) last month while the actively managed WisdomTree Emerging Markets Local Debt ETF (NYSEArca: ELD) saw August outflows of $112.5 million. [EM Bond ETFs Continue Slide on Rate Jitters]
The Turkish lira and Indian rupee hit record lows against the dollar last month, while the Brazilian real and Indonesian rupiah both hit four-year lows, according to the Journal. Despite the spotlight shining on a plethora of slumping emerging markets currencies, dollar-denominated developing bond ETFs have not been immune to outflows.
In August alone, a combined $307 million was pulled from the iShares J.P. Morgan USD Emerging Markets Bond ETF (NYSEArca: EMB) and the PowerShares Emerging Markets Sovereign Debt ETF (NYSE: PCY).
PowerShares Emerging Markets Sovereign Debt ETF
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of EMB.