ETF Market Breaks Its Asset Growth Streak

Cinthia Murphy, Managing Editor

The ETF market in February saw its first month of net asset outflows in two years. The record-breaking net-creations pace ETFs had been enjoying for months finally moderated last month, as the S&P 500 whipsawed during the month, and 10-year Treasury yields at one point hit a four-year high.

Altogether, U.S.-listed ETFs ended February with net redemptions of $4.4 billion, but it was a brutal month for U.S. equity funds, which, as a segment, bled more than $21 billion in net assets last month. The SPDR S&P 500 ETF Trust (SPY) alone faced $19.4 billion in net outflows.

Asset Classes (February 2018)

Net Flows ($, mm) AUM ($, mm) % of AUM
U.S. Equity -21,316.13 1,964,573.78 -1.09%
International Equity 12,910.22 854,952.81 1.51%
U.S. Fixed Income 2,203.01 520,693.66 0.42%
International Fixed Income -101.78 62,837.64 -0.16%
Commodities 367.73 69,352.50 0.53%
Currency 52.00 1,369.97 3.80%
Leveraged 1,537.67 36,688.41 4.18%
Inverse 225.79 13,678.37 1.65%
Asset Allocation -12.35 8,919.33 -0.14%
Alternatives -249.08 4,446.95 -5.60%
Total: -4,383.26 3,537,513.41 -0.12%

Still, despite investor jitters in February, the ETF market has thus far managed to attract a net of $64 billion in new net assets in 2018 following January’s impressive haul. International equity ETFs remain the most popular asset class so far this year.

Asset Classes (Year-to-Date)

Net Flows ($, mm) AUM ($, mm) % of AUM
U.S. Equity 9,502.13 1,964,573.78 0.48%
International Equity 37,591.63 854,952.81 4.44%
U.S. Fixed Income 6,905.49 520,693.66 1.33%
International Fixed Income 4,753.16 62,837.64 7.56%
Commodities 1,195.43 69,352.50 1.72%
Currency 98.79 1,369.97 7.21%
Leveraged 1,168.39 36,688.41 3.18%
Inverse 2,366.39 13,678.37 17.30%
Asset Allocation 122.03 8,919.33 1.37%
Alternatives -131.65 4,446.95 -2.96%
Total: 63,565.79 3,537,513.41 1.81%

Protectionism Rattles Industrials ETFs, Boost Metals

On the policy front, President Trump’s talk of imposing tariffs on imports of steel at 25% and aluminum at 10% this past week impacted ETFs.

Industrials funds such as the Industrial Select Sector SPDR Fund (XLI) were immediately hit—XLI dropped as much as 2% on the day of the president’s announcement on concerns that higher tariffs would translate into higher costs for companies that rely on those metals, such as automakers and aerospace names.

On the flip side, U.S. steel and aluminum producers welcomed the news as a boon against foreign competition they say is undercutting their market share. The only pure-play steel ETF on the market, the VanEck Vectors Steel ETF (SLX), jumped 1.1% on Thursday, while the SPDR S&P Metals & Mining ETF (XME), which owns U.S. metals and mining firms, rose 2.5%.

But what happens next in terms of performance of these funds is anyone’s guess. It will all depend on what the final tariffs look like if indeed implemented.

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

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

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