Investors Put the Brakes on ETF Buying in October

ETF Trends

Inflows to exchange traded funds listed around the globe slowed to $9.5 billion in October from $43.3 billion in September, which was the best month of the year.

Last month, flows into ETF were focused in emerging markets, gold and investment-grade bonds, according to a report from BlackRock.

Emerging market bond products garnered $1.9 billion, a monthly record. [Emerging Market Corporate Bond ETFs Trump Low Treasury Yields]

“Investors favored those providing sovereign exposure which offer higher credit quality than many high yield corporate bonds. Credit spreads have compressed in recent months as investors accept additional risk to gain income,” said ETF manager BlackRock.

In emerging market funds, investors favored ETFs tracking China and Brazil, where central banks have aggressively lowered interest rates.

Gold exchange traded products gathered $2.5 billion in October while investment grade corporate debt funds attracted $3.3 billion, according to BlackRock.

Meanwhile, investors pulled $10.7 billion from U.S. equity ETFs last month. SPDR S&P 500 (SPY) saw outflows of $7.2 billion after investors withdrew $10.5 billion in September.

At the end of October, there were 1,827 global exchange traded products with more than $1.8 trillion in total assets, according to the report.

Year-to-date global ETP flows of $192.3 billion have already surpassed 2011’s full year total of $173.4 billion. ETP flows for the January-October period were the strongest since 2008. Bond funds have attracted about one-third of all inflows so far this year.

October inflows of $9.5 billion “is not a bad number, but in the context of what happened in September, which was truly an extraordinary month for the industry, it is lower,” Dodd Kittsley, global head of ETP research at BlackRock, said in a Dow Jones report. “What was behind that [strong flows in September] was very much a risk-on trade globally that was fuelled by coordinated actions by central banks in terms of creating more accommodative monetary policy.”

He added: “Investors are beginning to say, ‘is this accommodative monetary policy going to stimulate growth or not?’”

Worries over the U.S. fiscal cliff and presidential election as well as slow growth in Europe also contributed to decelerating ETF flows, Kittsley said in the report. [What the ETF Flows Show]

Full disclosure: Tom Lydon’s clients own SPY.

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