July 10, 2020

Investor Demand Continues for Technology Sector Funds

by Pat Keon, CFA.

Funds in Refinitiv Lipper’s technology sector classifications took in $1.3 billion of net new money for the fund-flows week ended Wednesday, July 8. This was the thirteenth consecutive weekly net inflow for the group. This streak has driven the group to its third best quarterly net inflow result ever (+$15.6 billion) in Q2, trailing only the net intakes produced during the tech boom over 20 years ago when tech sector funds had net positive flows of $32.4 billion and $16.7 billion for Q1 2000 and Q4 1999, respectively.

The net inflows into tech sector funds goes hand-in-hand with the price appreciation that tech sector stocks experienced in Q2. The technology-heavy NASDAQ Composite Index posted a 30.6% increase in Q2, its best quarterly return since its 48.2% appreciation during Q4 1998. Unlike almost every other sector, the tech sector has actually benefitted from COVID-19 as it has increased the role that technology plays in the lives of many people. The coronavirus has forced large swaths of corporate America to work remotely and pushed shopping habits even more online and further away from brick-and-mortar stores. These changes have further emphasized the importance of technology in the day-to-day routines in the modern world.

This week’s tech sector net positive flows were driven by three sizeable net inflows into individual ETFs. The two largest of these were attributable to products from the same investment management company (ARK Investment Management) as ARK Innovation ETF (ARKK) and ARK Next Generation Internet ETF (ARKW) took in $254 million and $210 million, respectively. In addition, VanEck Vector Semiconductor ETF (SMH) grew their coffers by $111 million this week. The largest individual net inflows during Q2 belonged to Vanguard Information Technology Index Fund (+$2.7 billion), while the First Trust Cloud Computing ETF (SKYY) and the aforementioned ARK Innovation ETF (ARKK) both took in approximately $1.3 billion of net new money during the quarter.

 

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