Even amid the constant oscillations of volatility in the capital markets, exchange-traded funds (ETFs) are seeing positive flows while investors flee mutual funds like the bubonic plague in 14th century Europe.
As of the week ending Dec. 19, ETF saw over $25 billion in inflows while mutual funds lost $56 billion–the biggest outflow of capital from mutual funds since mid-October in 2008. According to data from the Investment Company Institute, outflows have increased on a weekly basis since Nov. 20.
In the mutual fund space, total equity, world equity and taxable bonds are seeing the most outflows. From a year-to-date standpoint, ETFs have garnered over $300 billion in net inflows.
From the period between Nov. 28 to Dec. 19, mutual funds saw outflows of $117 billion, while ETFs gained close to $50 billion. According to Bob Pisani of CNBC, this has been a persistent trend in 2018.
“This has really been the trend all year long,” said Pisani.
“The good news is ETFs continue to see inflows and a good part of that is due to outflows from mutual funds that’s benefitting the ETF business,” Pisani added.
Challenges like trade wars and rising interest rates have challenged the markets this year as volatility has become the new normal as of late. Wednesday’s 1,000-point surge in the Dow Jones Industrial Average was followed up with as much as a 500-point loss in Thursday’s early trading session.
Of course with those market challenges, Pisani points out that the rate of inflows into ETFs are slowing compared to last year, but even with a confluence of headwinds, ETFs are still experiencing positive inflows.
The inflows into ETFs speak to the flexibility of the funds as the investment vehicle continues to rise in popularity even amid major sell-offs in the equities space. A Wealth Management article also noted that also noted that investors are realizing the benefits of the return and alpha efficiency of ETFs–the ability to generate returns given their expense ratios and exposure to risks.