The SPDR S&P 500 ETF (NYSEArca: SPY) and the PowerShares QQQ (NasdaqGM: QQQ), the NASDAQ-100 tracking exchange traded fund, fell 2.2% and 2.8%, respectively, last month but those glum performances did not deter investors from pouring money into equity-based ETFs.
ETFs added $18 billion in net new assets last month with equity funds receiving more than $20 billion in new assets, according to State Street data. Outflows from fixed income and commodity funds pared the June inflows total to $18 billion.
“After starting the year more positively than expected, recent economic data out of Europe has been lackluster. In contrast, U.S. economic news has been on an upswing as evidenced by the recent strength in the housing market, consumer confidence numbers and job reports. All equity categories that we track added new assets in June, but the U.S. was far and away the winner with $9.4 billion of inflows,” said SSgA Head of Research Dave Mazza in a note.
Led by the iShares Russell 2000 ETF (NYSEArca: IWM), which hauled in more than $2.1 billion last month, five of June’s top 10 asset-gathering ETFs were U.S.-focused equity funds. The other five were international equity funds. Five fixed income funds were found among June’s 10 worst outflow offenders. [Despite Broad Market Slowdown, Small-Cap ETFs Are Outperforming]
At the sector level, financial services and healthcare ETFs continued to be prolific asset gatherers, extending a theme that was seen in May.
“At the sector level, investors concentrated their interest toward financials and healthcare with each taking in over $2 billion. Both remain well positioned in today’s market and may continue to see investor interest. Rate-sensitive sectors such as real estate and utilities saw outflows of over $495 million, which is not surprising given how trigger-happy investors have been around the potential for a rate hike in September,” according to Mazza.
ETF investors responded to ongoing speculation that the Federal Reserve is drawing closer to raising interest rates by embracing financial services ETFs in May. For example, the Financial Select Sector SPDR (NYSEArca: XLF), the largest financial services ETF, added nearly $545 million in new assets last month. Inflows to financial services ETFs, including XLF, arrived after professional investors shunned the sector in the first quarter. [Pros Ditched Bank ETFs too Soon]
The Health Care Select Sector SPDR (NYSEArca: XLV) added $590 million in May. XLF and XLV followed up those impressive May showings by adding $942.4 million and $927.7 million, respectively, in June. Overall, investors added almost $2.4 billion and nearly $2.8 billion to financial services and healthcare ETFs last month, according to State Street data. Conversely, rate-sensitive sector ETFs were out of style as utilities ETFs bled $771 million while real estate funds lost almost $500 million. [Rethinking Rate Sensitive ETFs]
Table Courtesy: SSgA
Tom Lydon’s clients owns shares of IWM, QQQ and SPY.