ETF Trends
ETF Trends

After being punished by soaring Treasury yields in 2013, some bond exchange traded funds are the toast of the town in 2014.

Last month, investors pulled nearly $10 billion from exchange traded products after ETF inflows reached a record last year, topping $200 billion for the second consecutive year. Equity-based ETFs were the culprits, shedding $10 billion “and diverged from the strong starts seen in the past two years. Investors continued to turn to ETPs to efficiently execute their market views during a volatile month for stocks,” according to BlackRock. [ETFs Bleed $10 Billion in January]

Things have not been much better this month. “ETFs – which have been reliably winning share over MFs since the Financial Crisis – are still in the red for 2014-to-date, at ($8.3) billion of outflows. Dig a little deeper into the ETF flows, and the mysteries compound. U.S. equity ETFs are down $24.7 billion in assets from redemptions, with three products accounting for essentially the entire ETF exodus from domestic stock funds,” said Nicholas Colas, chief market strategist at ConvergEx Group, a global brokerage company based in New York, in a note out on Feb. 19.

Bond ETFs have bucked the trend of departures from equity-based funds. U.S. bond ETFs have raked in $16 billion this month as of Feb. 21, the Wall Street Journal reported, citing TrimTabs Investment Research. That puts on bond ETFs for the biggest monthly gain since the iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSEArca: LQD) debuted in 2002 and is nearly double the previous record monthly inflow of $8.4 billion in May 2012, the Journal reported.

Short-duration bond ETFs with less sensitivity to rising interest rates have been a favored destination for fixed income investors this year. Three of the top 10 ETFs in terms of year-to-date inflows, including the top two, are funds holding bonds with maturities of seven years of less. The iShares 1-3 Year Credit Bond ETF (NYSEArca: CSJ) is one of those funds.  CSJ, which S&P Capital IQ rates overweight, has brought in almost $1.3 billion this year, bringing its assets under management total to $13.2 billion. [Sifting Through Short Duration Bond ETFs]

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