Volatile Market Sends Investors to Some Familiar ETFs

Predictably, struggling stocks have prompted investors to seek refuge with bonds and fixed income exchange traded funds.

Between Sept. 26 and Oct. 8, U.S. bond ETFs added $9.1 billion in new assets, according to BlackRock data. From Oct. 19 through Oct. 15, the iShares Core U.S. Aggregate Bond ETF (NYSEArca: AGG), iShares 7-10 Year Treasury Bond ETF (NYSEArca: IEF) and the iShares 20+ Year Treasury Bond ETF (NYSEArca: TLT) raked in about $870 million in new assets. [Investors Race to Bond ETFs]

However, some large investors are returning to equity-based ETFs and when they did so on Wednesday, one of the most volatile and worst days of 2014 for U.S. stocks, they displayed a preference for iShares funds. On Wednesday, a day that saw the S&P 500 trade lower by as much as 3% before closing down 0.8%, five of the 10 most heavily traded ETFs were iShares products, according to BlackRock data.

That group included the downtrodden iShares Russell 2000 ETF (NYSEArca: IWM), of which investor snapped nearly $860 million. With Thursday’s 1.1% gain on heavy volume, IWM has turned slightly positive for October and with Wednesday’s massive inflows, only the iShares Core S&P 500 ETF (NYSEArca: IVV) has taken in more new fourth-quarter assets than IWM. Along with IWM and TLT, IVV was among the most heavily traded ETFs on Wednesday. [S&P 500 ETFs Could be in Trouble]

Wednesday’s volatility reiterated the utility and, more importantly, the liquidity ETFs can provide even in times of market stress. The ability to enter and exit efficiently and quickly is critical to the value proposition for an important client segment — our trading-oriented investors.  These investors prefer iShares as the broadest, most liquid suite of ETFs, said iShares.

With institutional investors increasingly using broad market and sector ETFs and many boosting usage of ETFs for thematic and tactical exposure, fund issuers are working with these clients to provide robust liquidity. iShares frequently consults with clients on new product ideas and trade execution strategies, including gaining exposure to previously hard-to-access international markets and increasing liquidity at times of increased market volatility. http://www.etftrends.com/2014/09/institutional-investors-take-a-refined-approach-with-etfs/