June 29, 2018

Science and Technology Funds Continue as Investor Favorites

by Patrick Keon.

Science and technology funds (including both mutual funds and ETFs) have taken in $2.7 billion of net new money during Q2 2018. This extends their string of quarterly net inflows to seven and pushes their total positive net flows for the year to date to $10.1 billion. This number is approximately the same as last year’s total net inflows for the group (+$10.3 billion), which represented its second largest annual net inflows ever—trailing only the $12.9 billion of net inflows during the halcyon days of the year 2000 before the tech bubble burst.

ETFs (+$3.7 billion) have accounted for all of the group’s net inflows for Q2 2018. The largest contributors to this total are First Trust Dow Jones Internet Index Fund (FDN, +$502 million), iShares North American Tech-Software ETF (IGV, +$270 million), and ETFMG Prime Cyber Security ETF (HACK, +$187 million). Science and tech mutual funds actually have seen money (-$1.0 billion net) leave their coffers during the quarter. The largest net outflows belong to Fidelity Select Technology Portfolio (-$1.2 billion) and Ivy Science & Technology Fund (-$164 million). On the plus side of the ledger for mutual funds Vanguard Information Technology Index Fund has recorded a net-positive flow of $689 million for the quarter.

Positive net flows for the peer group dipped from $7.4 billion for Q1 2018 to the aforementioned $2.7 billion for Q2. The Q1 results were the largest quarterly net inflows since Q1 2000—prior to the tech bubble burst. Back in 2000 net inflows for the group fell significantly during Q2 and Q3, and after that we started to see net outflows fairly regularly. Therefore, it warrants watching to see whether Q1 2018 was the peak of the recent expansionary cycle for science and tech funds.

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