Exchange traded funds continued their breakneck pace of asset gathering in May, adding $18.3 billion in new capital as investors shuffled into international funds.
“Global ETP flows of $18.3bn were concentrated in developed market EAFE equities and Japan funds. Europe and U.S. flows were modest as mixed economic data for both regions has led to uncertainty over growth prospects. Still, 2015 asset gathering remains ahead of the record year-to-date pace set in 2013 and nearly matched last year on the way to a new full-year high,” according to BlackRock, parent company of iShares, the world’s largest ETF issuer.
The theme of inflows to international ETFs has prominent throughout 2015. Led by the WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ) and the Deutsche X-trackers MSCI EAFE Hedged Equity ETF (NYSEArca: DBEF), seven of this year’s top 10 asset-gathering ETFs are international developed market funds. [April ETF Flows: Stocks top Bonds]
Cementing the exponential growth of currency hedged ETFs, including HEDJ and 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). [Momentum for Currency Hedged ETFs]
“Currency-hedged equities brought in $3.4bn, slowed early in the month by a stretch of U.S. dollar weakening that began in April. Flows have proven responsive to currency movements, and resumed toward the end of May across EAFE, Europe and Japan funds as the dollar exhibited renewed strength,” said BlackRock.
The PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP), which tracks the price movement of the U.S. dollar against a basket of currencies, including the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc, faltered in the first half of May, but since May 16, the ETF is up nearly 2%. [Recent Weakness in Dollar ETFs Only a Minor Setback]
Emerging markets ETFs gathered $1.6 billion in new assets last month, marking the first time since August those ETFs have been flow positive in consecutive months, according to BlackRock. Since the start of the current quarter, the iShares MSCI Emerging Markets ETF (NYSEArca: EEM) has added almost $1.4 billion in new assets.
Investors are favoring different approaches to diversified emerging markets and China at the single-country level. For example, the iShares MSCI Emerging Markets Minimum Volatility ETF (NYSEArca: EEMV) has hauled in almost $401 million this quarter. [Favored EM ETF Idea]
The iShares China Large-Cap ETF (NYSEArca: FXI), the largest China-related ETF that tracks Chinese companies listed on the Hong Kong stock exchange, and the SPDR S&P China ETF (NYSEArca: GXC) have added $1.1 billion and $122.6 million, respectively, this quarter.