The exchange traded products industry has been on a roll this year. Total product count (both ETFs and ETNs) is now over 1,500 while assets under management have jumped to $1.5 trillion. Those are just the totals for the U.S. ETF market.
During the first half of 2013, ETFs experienced solid inflows of $74 billion and the early part of the current quarter followed that pattern with U.S. ETFs raking in $35.3 billion during the quarter’s first three weeks, according to ConvergEx data. [ETF Flows Pull U-Turn as Investors Grow Skittish]
The third-quarter trend has reversed as investors have pulled $7.3 billion from U.S. stocks funds and $3.5 billion from bond ETFs over the past 30 days. ConvergEx noted international equity funds have been pleasant surprises.
“Surprise: International equities are the bright spot over the last 30 days, with $2.8 billion in fresh money at a time investors are otherwise heading for the exit,” said Nick Colas, chief market strategist at ConvergEx, in a note out Wednesday.
Another segment of the ETF market that has been a surprise over the past month has been inverse and leveraged ETFs.
“They are, for example, 4.6% of 2013YTD flows. In the last month their flows are positive when the industry itself is negative, essentially making them +100% of the total. Put another way, investors have added $1.1 billion in fresh capital to these generally aggressive hedging strategies in the last 30 days,” Colas wrote.
Inflows to inverse and leveraged ETFs could be interpreted as a sign investors are expecting and looking to profit from a market pullback. What is interesting is not just that money is flowing into inverse and leveraged ETFs, but where that money is and is not going.
Silver prices have soared, so it is not surprising that the ProShares Ultra Silver (ZSL) , a double-leveraged bet on silver, has pulled in $37.3 million in new capital over the past 30 days. However, bond yields have spiked, indicating outflows from the ProShares UltraShort 20+ Year Treasury (TBT) are either surprising or a sign some investors were not expecting Treasury yields to continue heading north. [Silver ETFs Shine on Optimistic Sentiment]
The Direxion Daily Energy Bear 3X Shares (ERY) and the ProShares UltraShort Financials (SKF) pulled in a combined $5.5 million over past month, perhaps a sign some traders are expecting downturns for previously solid sectors as well.
ProShares UltraShort Financials
ETF Trends editorial team contributed to this post.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. 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.