ETF Investors Target High Quality Stocks, Safe Havens in Bank Crisis
March 9: That’s the date when the investment world became acutely aware that something was amiss at America’s regional banks. Silicon Valley Bank had failed to raise capital to plug a hole in its balance sheet, and the bank’s depositors collectively attempted to take a whopping $42 billion out of their accounts all at once.
A day later, the bank would be deemed insolvent, setting off a crisis in the broader regional bank industry—one that’s only been contained thanks to the support of the government.
What have ETF investors done since the banking crisis began?
Well, they’ve been plowing their money into safe-haven Treasuries and high quality stocks.
According to ETF.com data on fund flows for the period between March 9 and March 20, the SPDR S&P 500 ETF Trust (SPY) was the biggest asset gatherer, with inflows of $7.5 billion.
But more interestingly, the iShares MSCI USA Quality Factor ETF (QUAL) picked up an impressive $5 billion, a hefty sum for what today is a $23 billion fund. QUAL holds stocks with “quality characteristics,” such as high return on equity, stable year-over-year earnings growth and low financial leverage.
The Vanguard Dividend Appreciation ETF (VIG), which has a different mandate but also holds what you could call high quality stocks (those that have increased their dividends for 10 or more consecutive years) picked up $1.7 billion in the period.
Meanwhile, Treasury ETFs, like the iShares 7-10 Year Treasury Bond ETF (IEF), the iShares U.S. Treasury Bond ETF (GOVT) and the SPDR Bloomberg 1-3 Month T-Bill ETF (BIL) were in demand as well. Interest rates plummeted in the aftermath of SVB’s collapse, sending prices of these ETFs sharply higher.
Finally, bargain hunters piled into the SPDR S&P Regional Banking ETF (KRE). The fund, whose constituents are at the epicenter of the crisis, gathered $1.7 billion of assets in a period in which its price fell by 17%.
Flows for 03/09/2023 - 03/20/2023
Top 10 Creations (All ETFs)
Ticker | Fund | Net Flows* |
SPDR S&P 500 ETF Trust | 7,546.67 | |
iShares MSCI USA Quality Factor ETF | 4,996.10 | |
iShares 7-10 Year Treasury Bond ETF | 3,159.07 | |
iShares U.S. Treasury Bond ETF | 2,699.89 | |
SPDR Bloomberg 1-3 Month T-Bill ETF | 2,495.65 | |
Vanguard Dividend Appreciation ETF | 1,748.59 | |
SPDR S&P Regional Banking ETF | 1,677.59 | |
SPDR Portfolio Intermediate Term Treasury ETF | 1,515.61 | |
iShares 0-3 Month Treasury Bond ETF | 1,344.37 | |
Vanguard Total Stock Market ETF | 1,341.05 |
Email Sumit Roy at sumit.roy@etf.com or follow him on Twitter @ sumitroy2
Recommended Stories