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Investors Back Away From Mid-Cap ETFs

ETF Professor

Broadly speaking, exchange-traded funds have been on a torrid pace of asset gathering through the first quarter, but there have recently been some signs of departures from large-cap equity funds. Data suggest investors are also retreating from some popular mid-cap ETFs.

In terms of outflows, March has not been kind to the SPDR S&P MidCap 400 ETF (NYSE: MDY) and the iShares Core S&P Mid Cap ETF (NYSE: IJH). Both of those ETFs track the widely followed S&P MidCap 400 Index.

“IJH has over $38 billion in assets under management, while MDY is the second largest Mid-Cap ETF behind it with $19.5 billion,” said Street One Financial Vice President Paul Weisbruch in a recent note. “So while recent redemptions are certainly not gigantic in size, they’re still notable nonetheless given the year-to-date underperformance MidCaps have displayed versus the Large-Cap S&P 500 (trailing by nearly 300 basis points YTD).”

Recent Investor Action

Since the start of March, investors have yanked almost $1.2 billion combined from IJH and MDY. With cyclical sectors in favor for much of this year, it is interesting that mid-cap ETFs such as IJH and MDY would be bleeding assets.

For example, IJH devotes over 18 percent of its weight to technology, one of this year's best-performing sectors. Additionally, cyclical financial services, industrial and consumer discretionary names combine for about 41 percent of the ETF's weight.

Some mid-cap ETFs are dodging the outflows trend. For example, the iShares S&P Mid-Cap 400 Value ETF (NYSE: IJJ) has added nearly $53 million in new money this month. The $6.1 billion IJJ holds 286 and follows the S&P MidCap 400 Value Index. IJJ allocates over 45 percent of its weight to financial services, technology and industrial stocks.

As has been the case with so many Vanguard ETFs this year, the Vanguard Mid-Cap ETF (NYSE: VO) is packing on the assets. This month, investors have added $244.5 million to VO, bringing the ETF's year-to-date inflows total to over $1 billion. That is good for one of the best tallies among mid-cap ETFs.

VO only charges 0.08 percent per year, or just $8 on a $10,000 investment. That makes VO cheaper than 93 percent of competing funds, according to Vanguard data.

Related Links:

The Bull Market's Best-Performing Mid-Cap ETF

Size Matters With Small-Caps ETFs

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