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Gun Debate Reaches ETF Investing

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Cinthia Murphy, Managing Editor for ETF.com

The ongoing national debate over gun regulation has reached the ETF space. Data show that more and more ETF investors are turning their attention to ETFs built around environmental, social and governance rules (ESG) with the goal of managing exposure to gun manufacturers.

Since the shooting at Marjory Stoneman Douglas High School in Parkland, Florida, last month, nearly $150 million in assets have flowed into these kinds of ETFs, almost half of which landed into strategies that explicitly screen out some or all gun stocks.

Financial advisors are also reporting that more of their clients are calling in, trying to figure out how to avoid gun stocks in their portfolios going forward. While total flows into these types of strategies are miniscule relative to the broader market, there’s been a pickup in demand, pointing to the fact that the heated debate over gun control is spilling into the ETF world.

There are several ETFs available that screen out gun stocks:

Source: ETF.com, FactSet. Data as of March 2, 2018

Import Tariff Talk Impacts ETFs

Another national debate impacting ETFs in recent days is import tariffs on steel and aluminum.

Industries that rely heavily on those metals such as automakers and aerospace firms have felt the pinch of what could be higher production costs. As such, ETFs that invest in these companies and focus on sectors like industrials—think funds like the Industrial Select Sector SPDR Fund (XLI)—were initially pressured when news first came out about the possibility of tariffs, and they could stand to lose ground if tariffs are in fact implemented.

On the other hand, funds that invest in U.S. metals manufacturers could be well-positioned going forward because they’d stand to gain. ETFs like the VanEck Vectors Steel ETF (SLX) and the SPDR S&P Metals & Mining ETF (XME) come to mind.

While it remains to be seen what the final policy looks like and what it means for ETFs, talk of potential trade wars have already impacted ETF asset flows. In the past week, investors pulled nearly $10 billion of net assets from U.S.-listed ETFs, the bulk of which came from U.S. equity funds.

That marks the third weekly outflow in just five weeks, with funds like the SPDR S&P 500 ETF Trust (SPY) and the Industrial Select Sector SPDR Fund (XLI) among the biggest redemptions.

ETF Weekly Flows By Asset Class

Net Flows ($, mm) AUM ($, mm) % of AUM
U.S. Equity -9,345.18 1,955,819.49 -0.48%
International Equity 300.88 842,207.97 0.04%
U.S. Fixed Income -610.57 518,540.16 -0.12%
International Fixed Income -73.69 62,562.58 -0.12%
Commodities 128.31 69,546.30 0.18%
Currency -18.83 1,355.42 -1.39%
Leveraged 48.13 36,529.81 0.13%
Inverse 55.73 13,682.99 0.41%
Asset Allocation 32.60 8,926.22 0.37%
Alternatives -161.06 4,292.45 -3.75%
Total: -9,643.67 3,513,463.39 -0.27%

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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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