As U.S. markets rallied over November in a show of relief over the election day results and promising Covid-19 vaccines, stock exchange traded funds enjoyed record interest among investors.
“With the markets striking a decidedly risk-on tone, investors turned to ETFs to implement positions quickly, and with precision. Given the strength in equity markets, equity ETFs were the main beneficiary, as investors sought to deploy cash that may have been sitting on the sidelines,” Matthew Bartolini, Head of SPDR Americas Research, State Street Global Advisors, said in a research note.
Bartolini argued that the markets breathed a heavy sigh of relief after two headwinds were essentially removed at the same time: the resolution of presidential election uncertainty and a hopeful vaccine for the coronavirus pandemic. The two catalysts helped propelled global equities to post their best monthly return ever, with over 80% of stocks now trading above their 200-day average, compared to 50% at the start of the month, according to State Street Global Advisors data.
With markets striking a remarkably strong risk-on tone in a positive outlook, investors funneled over $90 billion into ETFs, with $81 billion going into equity funds.
Meanwhile, bond ETFs attracted $17 billion of inflows and set a record for most months in a year with over $10 billion of inflows, bringing 2020 total inflows to just $8 billion shy of the $200 billion mark.
“Fixed income ETFs continued to benefit from a secular shift into the asset class, even though the tone switched from defense to offense quite significantly. Yet, to assume that investors did not act tactically with bond ETFs would be incorrect, as $13 billion went into credit-sensitive market exposures as credit spreads tightened by 97 basis points to sit at 412 basis points – a level last witnessed prior to the pandemic,” Bartolini added.
Looking more closely at the ETF flows for the month, sector ETFs attracted $13 billion of inflows in November, the largest figure since November 2016 and well above the five-year average monthly flow figure of $1.5 billion. We saw a shift to the more beaten-down areas of the market as the renewed risk-on attitude helped attract investors to segments like energy and financials.
Meanwhile, thematic funds focusing on emerging trends in our economy also brought in $6.9 billion last month, bringing the year-to-date total to about $30 billion, or a 69% organic growth rate in assets under management outside of any price appreciation from the strong fund performance.
Additionally, ESG funds saw almost $5 billion in inflows last month and have now grown their asset base by 141% so far in 2020.
For more news, information, and strategy, visit the ESG Channel.