US-listed ETFs attract record-breaking inflows in January

Feb 7th, 2018 | By | Category: ETF and Index News

US-listed ETFs are off to a record-breaking year as investors piled $78 billion worth of net inflows into these products during January — the highest monthly inflow ever — according to data from State Street Global Advisors (SSGA). The net inflows shattered the previous high of $59bn set in November 2016.

US-listed ETFs enjoy record-breaking inflows in January, finds SSGA

Matthew Bartolini, head of SPDR Americas research at SSGA.

Matthew Bartolini, head of SPDR Americas research at SSGA, notes that inflows during the month were broad based with all asset classes in the black. Equities accounted for the lion’s share however with $67bn (86%) of the total flows. This was also a record monthly haul for that category, surpassing the $56bn record from December 2016.

Fixed income ETFs attracted $9.1bn in net new assets despite fears that the bond bubble was primed to burst, said Bartolini. While not record setting, these flows still represent a continuation of the segment’s persistent trend of over $9bn of inflows a month that began in 2016. Bartolini believes the trend is likely to continue well into 2018 as more investors turn to fixed income ETFs for constructing transparent, efficient, and flexible portfolios.

Looking at flows by fund exposure, the report found that the US continued to lead the market in absolute flows (ETFs providing exposure to US equities accounted for $40.4bn net inflows) while the pace of growth on a relative basis remained higher in international exposures. Flows between ETFs targeting broad developed markets ($8.9bn) and those targeting emerging markets ($9.0bn) were evenly split.

Notably, however, international fund flows shifted in favour of more targeted single country exposures which took in over $5bn last month, roughly equal to their calendar year 2017 flow total. Fifteen of the top twenty single country ETF inflows were targeted exposures in Asia/ Asian Sub-Continent regions. Bartolini notes these flows are consistent with the robust inflows into emerging market equity funds in January, which grew their asset base by 5% intra-month.

He said, “As the global synchronized growth story continues, this trend may continue. Furthermore, the emerging market segment should continue to be supported by a weak dollar, higher commodity prices and a resurgence in global trade. Stretched valuations in the US make this even more attractive on a relative basis.”

Emerging market exposures were also favoured in the fixed income space where ETFs tracking emerging market bonds took in $2.9bn, increasing AUM in this segment by an impressive 11.3%. The report notes that the majority of these flows were focused on local currency exposure, as dollar weakness and commodity strength bolster the fundamentals of emerging market issuers. Bartolini said, “Combined with the $2bn of outflows in high yield, this trend of emerging market inflows portends to investors seeking out the asset class for its income generation potential.”

ETFs tracking aggregate bond exposures took in $4.9bn while government bond ETFs attracted $1.4bn and inflation-protected ETFs netted $1.3bn.

Bartolini attributes the popularity of aggregate bond exposure to a rise in yields – the yield to worst on the Bloomberg Barclays US Aggregate Bond Index is near 3%, sitting at its highest level since 2011. He notes this rise in yield makes the ‘Agg’ a more attractive investment relative to recent years but still a way off its long-term average yield of 6.7%.

A weaker dollar continued to support gold prices which were up roughly 2.5% during the month. Accordingly, investors allocated $853 million to precious metals ETFs.

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