ETF Chart of the Day: Mid-Caps

ETF Trends

This week activity in Mid Cap equity centered ETFs has picked up dramatically, as we have witnessed significant creation activity (asset inflows) in a few notable funds.

The iShares MidCap400 (IJH) has reeled in nearly $1 billion in new assets just this week, and trading volume has been incredible, with one single day trading day on Tuesday of 15 million shares (versus average daily volume of 889,000 shares).

Similarly, SPDR Mid S&P Mid Cap 400 (MDY) has also seen a spike in trading activity and has attracted at least $200 million in new assets.

We do believe however that the IJH activity is a large accumulation of shares by a Registered Investment Advisor as opposed to market making/hedging activity.

Thus, the MDY volume spike, because both ETFs track the same MidCap400 Index is likely hedgers offsetting short basket positions at the time of the large IJH trades several days ago, and any uptick in options interest in either IJH or MDY is likely much of the same.

IJH debuted in June of 2000 while MDY launched way back in May of 1995 as truly one of the “pioneers” of the ETF industry. Head to head since inception however, even though these two funds track the same underlying index, IJH has outgained MDY (+120.12% versus +116.98%) which over time, is some impressive and demonstrable “recapture” of basis points over time to the underlying benchmark.

This live performance history, coupled with the fact that IJH sports a 20 bps expense ratio to investors versus MDY’s 25 basis point expense ratio, has provided the impetus for RIA and institutional investors alike to transition their mid cap equity allocations away from MDY to some degree and into IJH. The evidence is noted in that IJH is now the largest mid cap equity ETF in the space, with $11.8 billion in AUM compared to MDY’s $9.6 billion in AUM.

iShares MidCap400

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