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March ETF Flows Surge, Lag 2015
Investors poured a net of $16.6 billion into U.S.-listed ETFs in the month of April, keeping the ETF industry’s asset gathering at a much slower pace than year-ago levels.

Year-to-date, U.S.-listed ETFs have attracted some $41 billion in net creations. That compares with inflows of about $72 billion in the same four-month period in 2015.

Safer Assets

Cinthia Murphy
Updated

[Correction: An article we ran last week on year-to-date ETF asset flows had an incorrect figure for total inflows for the year. This story contains the correct figure of $29.5 billion in inflows for all ETFs as of March 31.]

Asset inflows into U.S.-listed ETFs picked up pace significantly in March, with U.S. and emerging market equity funds leading more than $32 billion in fresh net assets landing into exchange-traded funds during the month. Also present was a clear taste for the safety of gold.

The pace of net creations was a significant jump from February's lull, but it still put year-to-date ETF inflows at only about half the gains seen in Q1 2015, according to FactSet data. At the end of March, net creations sat at $29.5 billion—at the end of Q1 2015, that number was $59 billion in net inflows in the three-month period.

Conflicting Risk Demand In Flows

The creations pace may be notably smaller than a year ago, but what's interesting is that the latest data seem to show a conflict when it comes to investor demand for risk.

As S&P Capital IQ's Todd Rosenbluth said, having funds like iShares iBoxx $ High Yield Corporate Bond (HYG | B-68), the iShares MSCI Emerging Markets (EEM | B-100) and the SPDR Gold Trust (GLD | A-100) in the same pool is unusual because they are "on different ends of the risk spectrum."

The most popular ETF in March was one that had long been out of favor: EEM. The broad emerging market strategy gathered more than $4.6 billion in assets in one month. The inflows came as EEM rallied some 8.6% in that period.

As an asset class, international equities raked in nearly $4 billion in fresh assets in March, largely due to renewed enthusiasm associated with the emerging market space. The segment has been hit hard in recent years amid a commodity price slump led by oil, a strong U.S. dollar and concerns about the economic health of China.

Emerging Markets Look Cheap To Some

But lately, investors have been returning to the segment looking for value and opportunity, particularly in light of no Fed action since December.

"Emerging markets were in particular favor, with EEM and the iShares J.P. Morgan USD Emerging Markets Bond (EMB | B-58) having strong inflows as investors embraced risk again due to expectations of delayed Fed action," Rosenbluth said. "Similarly, investors moved out of short-term Treasurys."

The biggest redemptions last month occurred in funds such as the iShares Short Treasury Bond (SHV | A-97), the iShares 1-3 Year Treasury Bond (SHY | A-97) and the SPDR Barclays 1-3 Month T-Bill (BIL | A-62), even though as an asset class, U.S. fixed income remained popular, with more than $7.4 billion in net inflows in one month.

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