By Drew Voros
The rush of $6.2 billion into the SPDR Gold Trust (GLD) in 2016 makes it the leader in fund flows so far. But what could make the market turn into such a gold bug? Perhaps looking at the No. 2 ETF for inflows can give us some hints.
According to FactSet data, the iShares MSCI USA Minimum Volatility ETF (USMV) has taken in $4.7 billion in investor capital to now possess $12.4 billion in assets under management. USMV holds a basket of stocks that have low-volatility characteristics but then uses correlations between them to reduce its risk profile even further. Amid the up and down swings in the broader stock market, USMV has thrived this year, posting a 4.6% year-to-date gain, compared with only a 1.1% gain for the SPDR S&P 500 ETF Trust (SPY).
Is this flight to lower volatility confined to the U.S.? USMV’s international sibling, the iShares MSCI EAFE Minimum Volatility ETF (EFAV) had inflows of $1.9 billion, which also pushed it into the top 10 flows list for 2016. Does having investors lose their appetite for risk while rekindling their interest in gold present an opportunity for risk seekers or a warning to seek refuge?
Weekly ETF Flows
In the week ending Thursday, April 28, investors poured $4.6 billion into U.S.-listed ETFs despite the most recent market volatility. U.S. equity ETFs led, with $3.2 billion in inflows; followed by U.S. fixed-income ETFs, with $866 million in inflows; international equity ETFs, with $246 million; and inverse ETFs, with $228 million.
The world's largest ETF, the SPDR S&P 500 (SPY), led all ETFs, with $1.3 billion in creations. Other notable inflows were the Vanguard Total Bond Market ETF (BND), with inflows of $586 million; the Energy Select SPDR (XLE), with inflows of $283 million; and the WisdomTree Dynamic Currency Hedged International Equity ETF (DDWM), with inflows of $231 million, a huge sum for an ETF that launched at the start of 2016.
The biggest losers were the Consumer Staples Select SPDR (XLP), with redemptions totaling $591 million; the iShares 20+ Year Treasury Bond ETF (TLT), at $386 million; and the WisdomTree International Hedged Quality Dividend Growth (IHDG), which shed $262 million.
Saudi Arabia’s new investment strategy
Saudi Prince Mohammed bin Salman’s plan to broaden the Saudi economy includes the creation of a sovereign wealth fund that would eventually hold more than $2 trillion in assets to diversify revenues beyond oil. In a country that has seen about 90% of its state budget and more than half of its GDP covered by petroleum assets, the move to diversify Saudi Arabia’s economy could mean interesting opportunities for Middle East ETFs such as the iShares MSCI Saudi Arabia Capped (KSA), which only has about 1.4% of its portfolio in energy and which spiked higher following the prince’s decision.
WisdomTree has launched four smart-beta bond ETFs on Bats, the exchange operator that owns ETF.com
- WisdomTree Fundamental U.S. Corporate Bond Fund (WFIG), 0.18%
- WisdomTree Fundamental U.S. Short-Term Corporate Bond Fund (SFIG), 0.18%
- WisdomTree Fundamental U.S. High Yield Corporate Bond Fund (WFHY), 0.38%
- WisdomTree Fundamental U.S. Short-Term High Yield Corporate Bond Fund (SFHY), 0.38%
The ETFs seek to increase gains by focusing on companies with favorable fundamental metrics such as cash flow, profitability and leverage, while the high-yield funds only look at cash flow. According to the prospectuses, each index overweights the remaining bonds that have strong income characteristics.
The CrowdInvest Wisdom ETF (WIZE) is based on stocks picked by the users of the CrowdInvest Internet Platform mobile application. The 35 stocks with the most net long votes are selected for the index, with weightings determined by each stock’s number of votes. The recently launched Sprott Buzz Social Media Insights ETF (BUZ) uses a similar concept, but uses sentiment from online news articles, blogs and social media sources to select its stocks.
In early April, Horizons ETF Trust announced that it was delisting the Horizons Korea KOSPI ETF (HKOR) on April 29. Similarly, Direxion recently announced the impending closure of its two currency-hedged leveraged ETFs, the Direxion Daily MSCI Europe Currency Hedged Bull 2X Shares (HEGE) and the Direxion Daily MSCI Japan Currency Hedged Bull 2X Shares (HEGJ). The two funds are set to have their last day of trading on May 20, with less than $1.6 million in assets under management each.
The First Trust Indxx Global Agriculture ETF (FTAG) bought itself more time with a 1-for-5 reverse stock split on Monday, May 2. FTAG’s share price has declined by approximately 50% of its value over the last 12 months and currently has less than $4.2 million in assets under management.
Contact Drew Voros at firstname.lastname@example.org.
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