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Bond ETF Redemptions Drive June Outflows


Exchange traded funds saw outflows of $12 billion during June with most of the redemptions coming from bond products.

“According to BlackRock data, fixed income and emerging market equity ETFs experienced outflows initially following comment from Federal Reserve Chairman Ben Bernanke in late May about tapering bond purchases, and further comment in June. When June concluded, investors had pulled $7.5 billion out of fixed income products and $6.3 billion from emerging market equity products,” S&P Capital wrote in a recent note. [ETF Stats Reveal Market Sentiment for Second Half of 2013]

However, in the big picture, the outflows drowned out the $5.4 billion in new money that was invested into U.S. equities, with a focus on large-cap stocks. In total, outflows were less than 1% of the $1.44 trillion asset under management within the U.S. market.

Todd Rosenbluth of S&P Capital points out some of the trends within an industry that is still growing. Short-maturity fixed-income ETFs reported inflows due to the flexibility of near term maturities. iShares Bond 2016 Corporate ex-Financials Term ETF (IBCB) and the Guggenheim BulletShares 2014 Corporate Bond ETF (BSCE) have a duration under 3 years. [Defined Maturity Bond ETFs for Higher Interest Rates]

The broad-based emerging market ETFs were popular in early 2013, but have since experienced heavy outflows with about $5 billion pulled out in June alone. The iShares MSCI Emerging Markets (EEM) and the Vanguard FTSE Emerging Markets (VWO) lost $8.4 billion and $3.2 billion, respectively, over the first half of 2013.

Investors are shifting assets to prepare for a high interest rate environment, leading to the $18 billion loss in the SPDR Gold (GLD) . [Global Gold ETFs See Biggest Quarterly Outflow]

Investors have also focused on small-cap and mid-cap U.S. equities, which have gathered $2.3 billion and $700 million in assets under management for the month of June.

Tisha Guerrero contributed to this article.

Full disclosure: Tom Lydon’s clients own GLD and EEM.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.