Inflows data confirm investors have favored international exchange traded funds over U.S.-focused equivalents this year and that zeal is increasing as emerging markets funds continue morphing to leaders from laggards.
“Global ETFs gathered $36.1 billion in March to lift Q1 flows to $97.2 billion, nearly triple the total from Q1 2014. Investors put $71 billion into non-U.S. developed equities in the first three months of the year, making it the strongest first quarter on record. Currency hedged ETFs saw inflows of $26.8 billion in Q1 as investors looked to hedge their international equity exposure due to a stronger dollar,” according to BlackRock, parent company of iShares, the world’s largest ETF issuer. [ETFs Add $36.1B in March]
Year-to-date, six of the top 10 asset-gathering ETFs are international ETFs. Led by the WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ) and the Deutsche X-trackers MSCI EAFE Hedged Equity ETF (NYSEArca: DBEF), three of those six are currency hedged funds. Conversely, eight of the 10 ETFs worst afflicted by investor departures are U.S.-focused funds.
“TrimTabs also noted that inflows into global equity mutual funds and ETFs have totaled $88.3 billion ($1.2 billion daily) so far this year, putting them on track to surpass the previous four-month record of $86.0 billion ($1.1 billion daily) from December 2005 through March 2006. In April, global equity funds are up 3.5%,” according to the California-based research firm.
On the back of recently sturdy performances, emerging markets ETFs are also beginning to grab their share of inflows.
“Even ahead of the stimulus announced Sunday, exchange-traded funds focused on Chinese equities posted 22 consecutive days of inflows totaling $1.6 billion (7.8% of the funds’ assets),” according to TrimTabs.
With Chinese A-shares, the stocks that trade on the mainland, expensive relative to their Hong Kong-listed counterparts, ETFs such as iShares China Large-Cap ETF (NYSEArca: FXI), SPDR S&P China ETF (NYSEArca: GXC) and the iShares MSCI China ETF (NYSEArca: MCHI) are gaining investors’ attention…and assets. Since the start of March, those ETFs have added almost $850 million in new assets combined. [Investors Miss Out on China Rally]
“In the month ended Friday, April 17, emerging markets equity ETFs issued $2.3 billion (2.2% of assets), posting inflows on all but two trading days. During that span, they surged 8%,” according to TrimTabs.
Of the top 11 non-leveraged ETFs on a year-to-date basis, six are single-country emerging markets funds. Four are China ETFs and the other two track Russian stocks. Of this year’s top 10 ETFs tracking foreign markets, all 10 are emerging markets funds; eight for China and two Russia funds, according to Dorsey Wright data.
iShares China Large-Cap ETF