Exchange-traded funds are often heralded for their transparency
and low cost relative to mutual funds, but tradability was the
trait investors seemed to value most in June as they sought to
express their views in a volatile equities market.
June was rough for anyone with skin in the equities and bonds
games, as the U.S. Federal Reserve began suggesting that the end of
the easy money era might be in sight, pushing bond yields higher,
bond prices lower and equities markets into volatile spin. The
S&P 500 ended the month 1.5 percent lower, while the market's
so-called fear gauge, the CBOE Volatility Index futures (VIX),
reached an all-time volume record for the month of more than 4
In that environment,
accounted for roughly $1 of every $3 in trading volume in U.S.
equities markets, according to data compiled by BlackRock. That's
strong by historical standards-ETFs often represent less than a
quarter of total trading dollar volume. That mark came even as ETFs
saw record net outflows of some $12 billion of assets in June.
We've crunched these numbers at IndexUniverse in recent years
and come up with similar results, but some ETF industry sources,
including Credit Suisse, have said the dollar percentage of ETF
trading can spike above 40 percent when markets become roiled, as
was the case in August 2011 around the time of debt-ceiling talks
in Washington D.C., that culminated with the downgrading of U.S.
sovereign debt by Standard & Poor's.
"When headline-making news triggers a sudden shift in investor
sentiment and market volatility jumps, it has been followed by
elevated ETF trading volumes in absolute dollar terms and also in
proportion to total US equity market trading volumes," Dodd
Kittsley, head of Global ETP Market Trends Research for BlackRock,
said in a blog posting this week.
"It's important to note that June saw orderly trading of ETFs
and, as designed, ETFs delivered liquidity under stressed market
conditions," Kittsley said. "Investors were able to move quickly
and efficiently in and out of investment exposures, and this is a
trend we expect will continue as more investors turn to ETFs to
execute precise market views."
That's certainly not the case in a mutual fund, for instance,
where investors don't get the opportunity to buy or sell intraday,
making for a "flat" experience, IndexUniverse President of ETF
Analytics Dave Nadig said.
Dicey Investment Behavior
"It's important to remember that intraday trading is a two-way
street, and while the ETF market has been functioning pretty much
flawlessly in this newly volatile market, volatility can trigger
bad investor behavior," Nadig said.
"We've had days lately when certain ETFs have traded down 5
percent and recovered 5 percent all within a few-hour window," he
added. "If you see that on your screen at noon, it can be easy to
"That makes ETFs a great tool for 'capitalizing' on volatility,
but investors need to understand that just because they can trade
ETFs with whimsy and frequency doesn't mean that they should,"
In June, the SPDR S&P 500 (NYSEArca:SPY)-the largest ETF in
the world, with some $133 billion in assets-was the most heavily
traded ETF, with turnover that exceeded $572 billion, nearly five
times as much dollar-traded volume as the second-most-traded ETF,
the iShares Russell 2000 ETF (NYSEArca:IWM).
On a year-to-date basis, SPY also leads the trading charts, with
turnover of more than $2.75 trillion since the end of 2012.
Below, we tally the 10-most-traded ETFs year-to-date.
Interestingly, this lineup includes funds tapping into U.S.
equities, U.S. fixed income, international equities and gold-a
rather diverse showing of asset classes.
Also of note, the ninth-most-traded ETF in June, the iShares
U.S. Real Estate ETF (NYSEArca:IYR)-a fund that saw turnover last
month of $26.28 billion-is the only top-traded ETF in June that
does not make the year-to-date tally.
The SPDR Gold Shares (NYSEArca:GLD), the fifth-most-traded ETF
so far this year, with dollar trading volume of $241.4 billion, is
also suffering through one of the worst asset-losing streaks of the
year. It has recorded net redemptions of about $18 billion
||June YTD Flows
||June YTD AUM ($, M)
||June YTD Turnover
||SPDR S&P 500
||iShares Russell 2000
||iShares MSCI Emerging Markets
||iShares MSCI EAFE
||iPath S&P 500 VIX Short-Term Futures ETN
||iShares Barclays 20+ Year Treasury Bond
||Financial Select SPDR
||SPDR Dow Jones Industrial Average Trust
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