ETF Assets Reach New Record High

| September 3, 2014 | 0 Comments

fund flowsAugust was a record breaking month…

And I’m not talking about the S&P 500 eclipsing 2,000 for the first time ever.

Nope, I’m talking about the total amount of money in US listed ETFs… amazingly, total assets in ETFs ballooned to a record of more than $1.91 trillion.

However, the pace of the inflows into ETFs has slowed compared to last year. It remains to be seen if the slowdown in the pace of asset flows into ETFs is permanent or just a lull before the storm.

In my opinion, it’s only temporary. A much bigger migration from mutual funds into ETFs will drive massive amounts of money into ETFs in the years to come.

Over the last month, we’ve seen some sizeable net inflows and outflows from some interesting ETFs. These fund flows are a valuable indicator of what traders are thinking. It takes a lot of buying or selling to drive millions or even billions of dollars into or out of individual ETFs.

Fund flows are something traders use to find trends and gauge investor sentiment. And it can help you pinpoint which ETFs could be next to make a big move higher or lower.

The ETF with the largest net inflows in August were Treasury bond ETFs. The iShares 7-10 Year Treasury Bond (IEF), iShares 1-3 Year Treasury Bond (SHY), and iShares 3-7 Year Treasury Bond (IEI) collected $1.47 billion, $1.22 billion, and $765 million respectively.

The nearly $3.5 billion in net inflows is a clear indication investors favored fixed income ETFs over the last month. This was probably due to the heightened geopolitical tensions and violence in Ukraine, Gaza, Iraq, and other areas of the Middle East.

What’s more, the prediction that interest rates would begin moving higher as the economy recovered hasn’t come to fruition. In fact, deflation is the biggest problem in Japan and Europe right now.

In the global context, that means lower interest rates and more central bank actions to drive down interest rates in an attempt to boost inflation. In other words, the asset flows into Treasuries may not be just a flight to safety but savvy investors looking to profit from falling global interest rates.

One ETF that didn’t enjoy the same success as Treasury ETFs was the SPDR S&P 500 (SPY).   It lost more than $6.5 billion last month!

The large outflow of money from SPY is a big reason why total ETF inflows are running at a slower pace than last year.

But here’s the thing…

Other ETFs that track the S&P 500 like the Vanguard S&P 500 (VOO) and iShares Core S&P 500 (IVV) both had net inflows of over $1 billion last month.

In short, don’t read too much into the large outflow from SPY.

That wraps up this week’s ETF fund flows…

Keep in mind, there’s a lot of information about ETF fund flows. And it can be a very useful tool as long as you know what you’re looking for.

Good Investing,

Corey Williams

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Category: ETFs, Market Analysis

About the Author ()

Corey Williams is the editor of Sector ETF Trader, an investment advisory service focused on profiting from ETFs and the economic cycle. Under Corey’s leadership, the Sector ETF Trader has become one of the most popular and successful ETF advisories around. In addition to his groundbreaking service, Corey is the lead contributor to ETF Trading Research, where he shares his insights about ETFs and financial markets three times a week. He’s also a regular contributor to the Dynamic Wealth Report and the editor of one the hottest option trading services around – Elite Option Trader.

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