Despite the momentum in the riskier equity market, exchange traded fund investors continued to favor conservative bets and yield-generating plays.
Among the most popular ETF plays of the past week, six of the top ten were yield-generating investments and three included factor-based strategies that help limit downside risks.
For example, the iShares MBS ETF (NasdaqGM: MBB) attracted $1.3 billion in net inflows over the past week, according to XTF data. MBB provides exposure to a broad range of U.S. mortgage-backed bonds, including those issued by government sponsored enterprises such as Ginnie Mae, Fannie Mae, and Freddie Mac. The strategy also gained increased coverage after Rob Kapito, BlackRock’s president and co-founder, highlighted the opportunity in mortgage-backed securities.
Other bond-related ETFs also experienced heavy inflows, with Vanguard Total International Bond ETF (NasdaqGM: BNDX) seeing $872 million in inflows, Schwab Short-Term U.S. Treasury ETF (NYSEArca: SCHO) adding $714 million, iShares iBoxx $ High Yield Corp Bond ETF (NYSEArca: HYG) bringing in $382 million and iShares 20+ Year Treasury Bond ETF (NASDAQ: TLT) experiencing $340 million in inflows.
Furthermore, real estate investment trusts have been gaining attention as a yield-generating option in anticipation of a softer hand out of the Federal Reserve. The iShares US Real Estate ETF (NYSEArca: IYR) saw $354 million in net inflows over the past week.
Additionally, investors also favored more defensive factor-based or smart beta ETF strategies. Over the past week, the Invesco S&P 500 Low Volatility ETF (NYSEArca: SPLV) added $880 million in inflows, iShares MSCI Min Vol USA ETF (Cboe: USMV) attracted $339 million and Oppenheimer Russell 1000 Dynamic Multifactor ETF (Cboe: OMFL) saw $559 million in inflows. SPLV and USMV both play on more low-key U.S. company stocks that exhibit smaller swings, which helps limit a portfolio’s overall volatility. OMFL also includes a low-volatility factor within its multi-factor play set in an attempt to limit downside risk while still maintaining upside potential.
For more information on the fixed-income space, visit our bond ETFs category.