A Bond Rotation Could Support Stock ETFs | Page 2 of 2 | ETF Trends

ETF investors are already increasing their equity allocation, compared to fixed-income positions, this year. Over the first five months of the year, stock ETFs attracted $51.0 billion in net inflows while bond ETFs brought in $23.2 billion, according to BlackRock. In contrast, stock ETFs only added $22.4 billion in the first five months of 2014 while bond ETFs saw $26.0 billion in inflows.

Investors have already begun moving out of popular bond ETFs this year. For instance, the iShares 20+ Year Treasury Bond ETF (NYSEArca: TLT) saw $1.87 billion in outflows year-to-date, according to ETF.com.

Some are even hedging bets against falling interest rates with inverse bond ETFs. For instance, the ProShares UltraShort 20+ Year Treasury (NYSEArca: TBT) saw $83.9 million in inflows so far this year, Direxion Daily 20-Year Treasury Bear 3X (NYSEArca: TMV) attracted $204.4 million and ProShares Short 20+ Year Treasury (NYSEArca: TBF) brought in $36.5 million.

Meanwhile, investors have been turning to international equities this year. Led by the WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ) and the Deutsche X-trackers MSCI EAFE Hedged Equity ETF (NYSEArca: DBEF), four of this year’s top 10 asset-gathering ETFs are currency hedged funds. The other two are the WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ) and the iShares Currency Hedged MSCI EAFE ETF (NYSEArca: HEFA). Year-to-date, HEDJ added $13.9 billion, DBEF attracted $10.6 billion, DXJ saw $4.2 billion in inflows and HEFA brought in $2.6 billion. [Momentum for Currency Hedged ETFs]

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Max Chen contributed to this article.