Exchange traded fund investors exited U.S. stocks in January on growing concerns over growth and lackluster earnings results, but many shift into safe-haven assets in response to the heightened volatility.
According to BlackRock data, global ETF investors shifted into safer Treasury bonds and pulled $11.2 billion out of U.S. stock ETFs.
Treasury bond funds attracted $8.9 billion in net inflows or 65% of total fixed-income flows of $13.7 billion in January. Investors also favored shorter duration debt, with over half of all flows to Treasury funds and over 40% of total fixed income going into short-term products. Short-term debt would help investors diminish losses in the event of higher interest rates, hedge against market volatility and preserve capital as a cash alternative.
Aggregate or broad bond funds also garnered $2.2 billion as a diversified play on fixed-income.
While stocks were unloved over the first month of the year, global ETF traders piled into Europe and Japan stock ETFs, betting on further central bank easing. Japan equity ETFs gathered $5.2 billion ahead of the Bank of Japan’s latest move to stimulate growth. European stock ETFs attracted $2.4 billion on speculation the European Central Bank would take more accommodative measures to stimulate growth and support inflation.
Smart-beta stock ETFs that employ low-volatility strategies also attracted investors who were seeking a way to keep a toe in the stock markets without riding out the large swings. Low-vol products brought in $1.3 billion in inflows over January.
U.S. equity funds lost $11.2 billion in outflows, with sector funds shrinking by $4.3 billion and large-caps seeing $2.3 billion in redemptions.
The riskier developing markets also saw their fair share of redemptions, with broad emerging market funds losing $2.7 billion in outflows. However, investors grew more picky with their emerging economy exposure, funneling $2.2 billion into single-country ETFs.
Meanwhile, commodity funds saw $4.3 billion in inflows over January, one of their best months since February 2015. Short oil ETF bets brought in $2.3 billion and safe-haven gold funds collected $1.9 billion.
Despite the relatively unchanged asset flows to U.S.-listed ETFs, the global ETF industry still expanded by $13.9 billion in January, with a little over $2.8 trillion in total assets under management.
Max Chen contributed to this article.
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