ETF flows: Five things that matter
- US Index ETF flows reflected positive sentiment: Last week’s so-called “Simultaneous Triple High” in SPY, DIA, and QQQ accompanied large net inflows. Investors seem to have turned more optimistic as they increased US equity exposure instead of taking profits.
- GICS Sector ETF flows illustrated investor risk appetite: Capital was largely allocated to high-beta and cyclical sectors. Notably, ~40% of total inflows went into economically sensitive ETFs—the Industrial Select Sector SPDR Fund (XLI) and the Materials Select Sector SPDR Fund (XLB).
- Category ETF flows showed risk-on sentiment on a cross-asset level: SPDR’s S&P 500 ETF Trust (SPY) attracted the most inflows in our overall ETF universe, closely followed by iShares’ MSCI Emerging Markets ETF (EEM). In contrast, SPDR’s Gold Trust (GLD) witnessed the largest weekly outflows.
- Capital flows into Emerging Market Equity ETFs broadened: Five out of the ten ETFs with the largest weekly inflows in our country universe focus on the emerging market equity space (EEM)(VWO)(IEMG)(EEMV)(DEM).
- Currency-hedged ETFs that focus on Europe and Japan went out of favor: WisdomTree’s Japan Hedged Equity Fund (DXJ) and the Deutsche X-trackers MSCI EAFE Hedged Equity ETF (DBEF) saw the largest weekly outflows.
Take a look at our Chart of the Week
As you can see in the chart above, YTD (year-to-date) asset inflows into emerging market equity ETFs have been remarkably broad. In fact, out of the top ten countries that witnessed the largest YTD inflows, four ETFs offer exposure to the emerging market equity space (EEM)(IEMG)(VWO)(EEMV). Perhaps more telling: ~48% of the total YTD inflows into the top ten country ETFs went into the emerging market equity ETF space.