SSgA Retail ETF ‘XRT’ Bleeding Assets

By Olivier Ludwig,

Shutterstock photo

State Street Global Advisors' SPDR S&P Retail ETF (NYSEArca:XRT) has been bleeding assets in the past two months. Between investor redemptions and the downdraft in the stock market, the fund's assets have fallen by more than 60 percent since the end of May, from $1.2 billion to just $453 million at the end of July.

Part of that drop is explained by a 10.8 percent decline in XRT's price over the two-month period, but the bulk has come from investors cashing out of the fund:XRT suffered redemptions of $275.5 million and $447.4 million in June and July, respectively, according to data compiled by

The mystery deepens to the extent that competing retail ETFs, such as the Retail HOLDRs (NYSEArca:RTH), had net creations in July. RTH had redemptions of $48.7 million in June and inflows of $46.4 million in July. RTH's total assets were $426.5 million at the end of last month, just shy of XRT's $453 million.

"It could be sector rotation with people getting into different ETFs," said Paul Weisbruch, an ETF trader at Street One Financial in King of Prussia, Pa. "It could also be 'pairs trading,' with people shorting the ETF that has outperformed and going long the one that's underperformed."

He said XRT is up about 6 percent this year, while RTH has fallen about 4 percent, creating a perfect opportunity for traders to bet RTH will start doing better. The fact that about 20 percent of RTH's holdings are in Wal-Mart could help the ETF, given the growing concern that the economic recovery is slowing or even stalling out completely. XRT has just 1.59 percent of its portfolio in the low-cost retailer.

More Numbers

The "case of the disappearing fund" appears to be continuing for XRT in August. data show that the fund suffered outflows of $40 million on Thursday, Aug. 5, and $173 million on Wednesday, dropping its assets under management to just $292.2 million.

To be sure, retail equities in general don't do so well in times of economic uncertainty.

"When financial stocks fall and oil goes higher, retail does not tend to do well," Weisbruch noted.

A glimpse at creations and redemptions of a third retail ETF, the PowerShares Dynamic Retail Portfolio (NYSEArca:PMR), is more consistent with XRT's fate.

While PMR is considerably smaller than XRT or RTH, it had net redemptions of $870,000 and $810,000 in June and July, respectively.

"It's probably one or two big funds doing a 'pairs trade,'" Weisbruch said. "That would make sense."

Don't forget to check's ETF Data section.

Copyright ® 2010 Index Publications LLC . All Rights Reserved.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing ETFs
Referenced Stocks: PMR , RTH , XRT

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