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
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 IndexUniverse.com.
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.
The "case of the disappearing fund" appears to be continuing for
XRT in August.
IndexUniverse.com 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,
"It's probably one or two big funds doing a 'pairs trade,'"
Weisbruch said. "That would make sense."
Don't forget to check IndexUniverse.com's ETF Data
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