Keeping an eye on fund flows can yield powerful insights into investment trends. Invesco PowerShares is an ETF Sponsor with a recently launched tool that allows anyone to glean insights from the inflows into their diverse stable of ETFs. Called the “Flow Tracker” and available on the firm’s website, investors can view inflows into PowerShares funds over periods as short as one day and set periods as long as 90 days. Here’s a sample report I created highlighting the top 10 inflows into PowerShares ETFs this year.
For background, Invesco PowerShares is the fourth largest ETF Sponsor in the U.S. with $102 billion in ETF assets as of March 12, 2014 according to industry site ETF.com. The firm is known for its continuous innovation in the ETF space. It also is often recognized as the sponsor of the PowerShares QQQ, which tracks the NASDAQ 100 index. PowerShares’ wide and deep ETF product lineup makes it a great proxy to see developing investment trends.
A few observations jump out to me as I examine the top inflow leaders at PowerShares year-to-date. First the PowerShares Senior Loan Portfolio (BKLN) has been a massive asset gatherer for the firm in 2014. At over $900 million this year alone, it has gathered more assets than the next three ETFs combined. BKLN is in demand as a way for investors to obtain investment income through an asset class – senior loans - that has the potential to minimize interest rate risk. Clearly investors are concerned about rising rates and are making the migration to BKLN and ETFs like it including SRLN, FTSL and SNLN. Some might argue that this area might be getting frothy given such extreme inflows however.
Second, notice that seven of the ten ETFs making the top 10 list are equity ETFs. The remaining ETFs are income or commodity focused. Looking closer at the seven equity ETFs, four of them are sector focused: PBJ, PJP, PNQI and PBE. This is a sign that not only do investors feel comfortable with equities but they believe there are concentrated opportunities available within the broad equity market. Indeed a quick review of the year-to-date performance of these four sector ETFs via Stockcharts.com shows material outperformance versus the broad based S&P 500 ETF (SPY).
Finally the PowerShares Buyback Achievers Portfolio (PKW) is worth noting given its strong position in second place at just over $400 million in 2014. The fund tracks an index of companies that have reduced their shares outstanding by at least 5% over the previous 12 months. A share buyback policy is usually a sign that the management of a company believes its shares are under-valued and thus stock buybacks can be a bullish sign for investors. Critics of share buybacks however might argue that a company may be better off using the capital to expand its business or pay existing shareholders a dividend. While PKW’s performance has been fairly similar to the S&P 500 year-to-date, a closer examination of the fund’s attractive total return since its inception in December of 2006 may point to its significant inflows in 2014. Here’s a comparison of PKW to SPY, the S&P 500 ETF.
Both industry and ETF Sponsor specific fund flows are fascinating to watch and analyze. Hopefully our quick review of the results from Invesco PowerShares’ new “Flow Trend” tool delivered a glimpse into some of the insights and ideas that can be gleaned from this information.