October 25, 2019

Equity ETFs are Main Asset Attractors YTD, But Mutual Funds Still Have the Edge in the Bond Space

by Tom Roseen.

The top-line Lipper fund-flows numbers show that fund and ETF investors have injected a net $547.6 billion year to date through the week ended Wednesday, October 23, 2019. However, that figure is somewhat misleading.

Despite strong equity market returns—year to date the Dow Jones Industrial Average is up 15.03% and the NASDAQ composite is up 22.37%—equity funds (including ETFs) have witnessed net redemptions of $144.4 billion, while money market funds (+$390.2 billion), taxable bond funds (+$227.4 billion), and municipal bond funds (+$74.3 billion) have been the main attractors of net new money.

However, the breakout between conventional funds and ETFs tells a more thorough story. While conventional equity funds suffered net redemptions of $186.7 billion year to date, equity ETFs have been attractors of investors’ assets, taking in $42.3 billion.

Conventional taxable bond funds, attracting a net $128.1 billion year to date, still have an edge over their taxable bond ETF (+$99.4 billion) counterparts, and the same applies for tax-exempt bond funds, with conventional municipal bond funds taking in $68.4 billion year to date and their ETF counterparts attracting $6.0 billion.


That said, of the $147.6 billion collectively taken in by U.S. ETFs year to date, more than half (54%) of those inflows are attributable to just 10 ETFs: iShares Edge MSCI Min Vol USA ETF (USMV, +$12.0 billion), Vanguard 500 Index ETF (VOO, $11.5 billion), Vanguard Total International Bond Index ETF (BNDX, +$8.7 billion), Vanguard Total Stock Market Index ETF (VTI, +$8.4 billion), iShares US Treasury Bond ETF (GOVT, +$7.4 billion), iShares 20+ Year Treasury Bond ETF (TLT, +$6.5 billion), iShares 7-10 Year Treasury Bond ETF (IEF, +$6.4 billion), iShares Core S&P 500 ETF (IVV, +$6.3 billion), iShares MBS ETF (MBB, +$6.2 billion), and iShares Core MSCI EAFE ETF (IEFA, +$6.2 billion).

As a side note, SPDR S&P 500 ETF Trust (SPY, -$13.4 billion) and iShares MSCI EAFE ETF (EFA, -$10.5 billion) suffered the largest net redemptions of all U.S. ETFs so far this year.



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