Investors have stepped back into the U.S. market, picking up broad stock exchange traded funds for the sixth straight week.
U.S. stock ETFs attracted $3.5 billion last week and saw their sixth straight week of net cash inflows, reports Trevor Hunnicutt for Reuters.
“ETF investors have fueled the bull market since the end of February,” Jeff Tjornehoj, Lipper’s head of Americas research, told Reuters.
Investor inflows largely targeted ETFs invested in U.S.-based companies, which brought in $2.3 billion in net inflows following two weeks of outflows. For example, the SPDR S&P 500 ETF (NYSEArca: SPY) attracted almost $3 billion over the past week.
“They did like technology and utilities, which is an odd combination because utilities are a defensive play and technology is an aggressive one,” Tjornehoj added.
U.S. technology funds brought in $767 million for the week while utilities sector funds added $485 million, according to Lipper. The Technology Select Sector SPDR (NYSEArca: XLK) added $545.1 million and the Utilities Select Sector SPDR (NYSEArca: XLU) attracted $245.7 million over the past week, according to ETF.com.
Meanwhile, international ETFs saw $888 million in inflows and taxable bond funds saw $818 million in inflows, according to Lipper data.
On the other hand, stock mutual funds in the U.S. posted $328 million in outflows for the week ended April 6.
The outflows may reflect investors’ growing dissatisfaction with active managers’ ability to beat their indices. Less than one in five large-cap funds outperformed the benchmark S&P 500 Index, the lowest number of beats since at least 1998.[related_links]
According to EPFR data, actively managed equity funds experienced $34.9 billion in net outflows globally this year, whereas global stock market ETFs, which passively track a benchmark index, have attracted another $7.6 billion, despite the volatility in the first quarter, Financial Times reports.
The ongoing underperformance in active funds has accelerated a shift toward passive strategies like ETFs. Last year, ETFs brought in almost $200 billion while actively managed equity funds lost $124 billion.
“It doesn’t surprise me that we’re getting this continuous move towards passive investment,” Mohamed El-Erian, chief economic adviser to Allianz, told the Financial Times. “Active funds have disappointed investors, and in a low-return environment costs become more important.”