September ETF Flows Reveal Investors' Preference for U.S., Emerging Market Stocks

Equities recovered from a slight pullback and stuck to range bound trading for most of September, but investors still piled into stocks as traders positioned for continued growth ahead.

The Real Estate Select Sector SPDR Fund (NYSEArca: XLRE) stood out in September, gaining $3.2 billion in net inflows for the month, according to But the sudden influx in assets may be deceptive as a good chunk of the huge inflows were due to a special dividend that spunout real estate investment trusts from the broader financials sector.

As we have previously told investors prepping for a big change to a popular financial ETF, the Financial Select Sector SPDR (NYSEArca: XLF) was reconstituted to remove real estate companies from the financial sector, except for mortgage REITs in response to the S&P Dow Jones Indices’ changes to index constituents of the benchmark. XLF investors who held onto shares going into the the changes were issued a special dividend comprised of shares of XLRE.

Investors continued to pile into large-cap U.S. stocks over September. For instance, among the most popular ETFs of the month, the Vanguard 500 Index (NYSEArca: VOO) attracted $1.4 billion in  net inflows, iShares Russell 1000 Value ETF (NYSEArca: IWD) saw $1.2 billion in inflows and iShares Core S&P 500 ETF (NYSEArca: IVV) added $665 million. Large-cap U.S. stocks typically experience greater attention during more uncertain market conditions. On the other hand, the SPDR S&P 500 ETF (NYSEArca: SPY) saw $3.9 billion in outflows, which suggests that institutional traders are trimming their exposure to U.S. stocks while smaller long-term investors have been shifting into the cheaper IVV and VOO options.

The Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO), brought in $982 million in net inflows and the iShares Core MSCI Emerging Markets ETF (NYSEArca: IEMG) attracted $709 million.