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March 30, 2018

In Spite of the Tech Slide, Investors Continue to Pad the Coffers of Technology Funds and ETFs

by Tom Roseen.

Despite recent headlines bemoaning the slide in technology stocks as reports circulated that Cambridge Analytica purportedly used illegally obtained data on more than 50 million Facebook users in an attempt to influence election outcomes, technology mutual funds continue to attract net new money.

Even though the NASDAQ declined 5.39% for Thomson Reuters Lipper’s fund-flows week ended March 28, 2018, and the average technology fund lost 6.29% of its prior week’s ending value, technology funds gained some $101 million for the week, attracting net new money for the seventh consecutive week.

The wreck in tech appears to be impacting 2017’s highest flyers (the FAANG stocks), led by a 20%-plus decline for Facebook since its record high set earlier this year. Perhaps as a result of buying the dip or on a more sanguine outlook for broader technology issues, fund investors remain net purchasers of technology funds.

So, while some investors appear to be trying to “deFAANG” their portfolios, others seem to be embracing technology issues as we approach the Q1 earnings-reporting season. They may be hoping the recent relatively strong economic reports and tax cuts will bode well for the markets—including the sector that has powered the lion’s share of the market gains over the last year or so.

On the technology ETF side of the equation First Trust Dow Jones Internet Index ETF (FDN, +$218 million) attracted the largest draw for the fund-flows week, followed by iShares U.S. Technology ETF (IYW, +$57 million) and First Trust NASDAQ 100 Technology ETF (QTEC, +$12 million). Meanwhile, Technology Select Sector SPDR ETF (XLK, -$202 million) experienced the largest net outflows for the week. For 2017 as a whole technology funds (including ETFs) attracted a net $12.9 billion. For the year-to-date period ended March 28, 2018, technology funds have taken in $9.2 billion net.


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