The exchange traded fund industry offers individuals a wide range of investment choices and ideas, but ETF buying patterns so far this year indicate investors are favoring yield and dividend strategies.
Dodd Kittsley, an investment strategist at iShares, pointed out that ETF flows show investors were interested in fixed-income and dividend assets in 2012.
“Investors are increasingly recognizing the advantage that ETFs offer in fixed income market,” Kittsley said on the iShares Blog, pointing to the added transparency of prices and exposure.
For instance, ETFs provide “more precise and more efficient” exposure to a range of bonds, such as emerging market debt and investment grade corporates. According to IndexUniverse data, the iShares JPMorgan USD Emerging Markets Bond Fund (EMB) added $2.4 billion and iShares iBoxx $ Investment Grade Corporate Bond Fund (LQD) gained $6.9 billion assets year-to-date.
With the various options available, “investors can rotate exposure or customize exposure based on their views of the markets,” Kittsley added.
Additionally, he noticed that the past 12 to 18 month flows show that investors have leaned toward equity income or dividend ETFs when they couldn’t find suitable yield generating options in fixed-income ETFs. Specifically, Kittsley saw an uptick in preferred and real estate investment trust ETFs. The iShares S&P US Preferred Stock Index Fund (PFF) saw $2.8 billion and Vanguard REIT ETF (VNQ) added $4.4 billion in new inflows year-to-date.
“At the end of the day, the tool box for investors has increased so much because of the innovation we’ve seen,” Kittsley said.
For more information on ETF asset flows, visit ur ETF performance reports category.
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own EMB and LQD.
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