While U.S. equities suffered through the worst two-day selling since May, ETF investors carried on like businesses as usual, dumping billions more into stock ETFs.
ETFs attracted $78.5 billion in January, exceeding the previous monthly record inflow by almost 30%, reports Sarah Ponczek for Bloomberg.
Eric Balchunas, a Bloomberg Intelligence senior ETF analyst, also pointed out that ETFs experienced $4 billion per day in inflows, even during the recent market sell-off.
“This is unusual, especially for the highly liquid ETFs such as SPY, where flows usually correlate to the market,” Balchunas said, identifying two reasons for the divergence: “First, the low ETF volume during the selloff foreshadowed that it wasn’t that much of a panic situation and would be a ‘buy the dip’ type of selloff. Second, many investors may have used it as an excuse to move out of their mutual funds into an ETF.”
For example, over the past week, the SPDR S&P 500 ETF (NYSEArca: SPY) attracted $5.0 billion in net inflows, iShares Core S&P 500 ETF (NYSEArca: IVV) saw $3.0 billion in inflows and iShares MSCI Emerging Markets ETF (NYSEArca: EEM) added $1.4 billion, according to XTF data.
Some may have seen the recent pullback as an opportunity to ditch more expensive and underperforming mutual funds for ETFs, which may be particularly noticeable during down days as investors take their profits.
“This provides a window into the seismic shift into ETFs that could occur in the next bear market, when investors who are currently ‘locked in’ to active mutual funds via their unrealized gains can finally leave for the cheaper, more tax-efficient ETF structure,” Balchunas said.
Among ETF providers, State Street Global Advisors, the name behind the SPDR brand, was the chief beneficiary of the new January inflows, attracting the most money through flows for the second straight month.
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