ETFs Shed $17 Billion in a Month, Reversing 2013 Inflow Trend

ETF Trends

U.S.-listed ETFs have lost about $17 billion of assets under management over the past 30 days, with emerging market and bond funds leading the outflows.

The past month is “quite a departure from the steady-as-she goes pace of inflows more common to the product,” Nicholas Colas, chief market strategist at ConvergEx Group, said in a note Friday.

“Some asset classes have been harder hit than others, of course,” he added. “Fixed income funds have lost $9.4 billion, and commodity-oriented ETFs have shed $2.9 billion. The biggest bullet thus far has been at the top of the risk pyramid, with emerging markets funds losing $10.4 billion.”

Since the end of May, investors have redeemed $5 billion from iShares MSCI Emerging Markets (EEM) and $2.1 billion from Vanguard FTSE Emerging Markets (VWO), according to IndexUniverse data.

Meanwhile, in bond ETFs, iShares Investment Grade Corporate Bond ETF (LQD) and iShares TIPS Bond (TIP) have seen the heaviest selling with outflows of $2.4 billion and $2 billion, respectively.

However, Colas doesn’t think ETF selling is impacting their underlying markets.

“We tend to think that these unusually negative flows are more a symptom of recent market unrest than a cause,” he said. In other words, the tail isn’t wagging the dog.

In bond ETFs, even though some funds have grown very large, “they still only represent a very small portion of the [fixed-income] universe, and therefore would not be capable of ‘moving’ the underlying market in a meaningful way,” says Dodd Kittsley, head of global ETP market trends research for BlackRock. [iShares: ETF Mythbusting — Can Bond Funds Move the Market?]

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