Credit: Shutterstock photoDrew Voros
ETF.com Editor-in-Chief
Another week, another record for ETF inflows. Some $5.4 billion flowed into U.S.-listed ETFs during the week ending Thursday, Nov. 16, according to FactSet, pushing year-to-date inflows to $398 billion.
Encouraged by the passage of the Republican tax reform bill in the House of Representatives, investors added $3.7 billion to U.S. equity ETFs. The positive mood spilled over into international equity ETFs also, which had inflows of $1.6 billion of their own.
However, the week was not without worries. The S&P 500 fell slightly for a second-straight week amid the realization there is still much work to be done to reconcile the House and Senate versions of the tax bills.
There was also some angst about this month's dip in the junk bond ETF market. Funds such as the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and the SPDR Bloomberg Barclays High Yield Bond ETF (JNK) hit seven-month lows during the middle of the week before rebounding modestly.
The junk bond duo had sizable outflows of $348 million and $934 million, respectively, this week. Nonetheless, total assets under management climbed to $3.27 trillion.
Seismic Sector Shift
On Nov. 15, S&P Dow Jones Indices and MSCI announced a dramatic change to its Global Industry Classification Standard (GICS), which underpins the indexes backing hundreds of ETFs.
The changes, which go into effect next year, will reorganize several high-profile technology stocks and realign sector definitions such that the so-called FANG (Facebook, Amazon, Netflix, Google) stocks would likely move into a single sector.
The revisions, announced as part of their annual review of the GICS, will involve renaming the “telecommunication services sector” to the “communications services sector” and broadening its scope considerably.
As much as $62 billion in ETF assets could be impacted by the change.
No specific stock reclassifications have been announced yet, but the changes could affect the lineup of at least 30 sector funds, including those from Vanguard, iShares, State Street, Fidelity, Guggenheim and PowerShares.
New Constituents For VOX, FCOM, XTL
The GICS methodology is reviewed annually to ensure the sector framework continues to reflect the reality of the equity markets. The last time the GICS was reviewed, S&P and MSCI broke out a new real estate sector from the existing financials sector. With it came at least one new ETF, the Real Estate Select Sector SPDR Fund (XLRE) (see: "Growing Pains For New Real Estate Sector").
This year's revision, however, has the potential to be much more impactful.
For starters, the new sector will split into two industry groups: telecommunication services, and media and entertainment.
The telecommunications services group will continue to provide exposure to providers of telecom and related services, but now it will also include internet service providers. That means telecom ETFs like the $1.2 billion Vanguard Telecommunications Services ETF (VOX), the $370 million iShares Global Telecom ETF (IXP), the $112 million Fidelity MSCI Telecommunication Services Index ETF (FCOM) and the $46 million SPDR S&P Telecom ETF (XTL) will likely welcome new constituents to their portfolios, such as AT&T, CBS, Comcast or Verizon Communications.
Drew Voros can be reached at dvoros@etf.com.
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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.
