ETFs experienced a record amount of inflows last week despite renewed volatility but was quickly pared with high outflows, revealing traders’ increasing reliance on the nifty investment vehicle to garner quick access to broad markets.
According to FactSet data, a record $45 billion was funneled into ETFs last week, but $23 billion has already been yanked out, reports Asjylyn Loder for the Wall Street Journal.
The quick turnaround may be attributed to a the March 16 expiration of futures and options on stocks and stock indices in what traders call “quad witching.” The so-called witching hour coincided with the rebalancing of hundreds of stock indices, including many found in popular ETFs that invest in dividend-paying companies.
“People view ETFs as passive index funds but investors use them in all kinds of different ways,” Matthew Bartolini, head of SPDR Americas Research at State Street Corp, told the WSJ. “Investing is never passive, and you can see that in the fund flows.”
Heaviest ETF Flows of Past Week
Of the heavy inflows the past week, $10.7 billion went into the popularly traded and largest ETF, the SPDR S&P 500 ETF (NYSEArca: SPY). Bartolini pointed out that flows in and out of SPY tend to be particularly volatile as options near expiration and investors hedge or close out bets against the market.
The iShares Select Dividend ETF (NYSEArca: DVY) also experienced a quick turnaround in assets after enjoying a $17 billion injection before seeing the money funnel right back out two days later.
Ben Johnson, head of global ETF research for Morningstar Inc., explained that this typically occurs when ETFs rebalance their portfolios to realign holdings with their benchmark indices.
“There was a wholesale change to the underlying index methodology, so to implement that, they had to give the portfolio an extreme makeover,” Johnson told the WSJ.
For more information on the ETF market, visit our ETF Performance Reports category.