By John D'Antona

Equity, Fixed Income ETF Inflows Climb

Volatility be damned as investors continued to pour money into exchange-traded funds in November.

It didn’t matter whether the market was up, down or spinning sideways on a Presidential tweet as equity and fixed-income ETFs saw healthy inflows of new cash during November, according to the latest report from State Street Global Advisors. U.S. listed ETFs attracted $44 billion of new funds bringing 2018’s fund flow total to $260 billion with one month remaining in the year.

Matthew Bartolini, SSGA

In the asset class breakdown, equity ETFs had the most flows of any category during the month at $30 billion. This is almost twice the five-year monthly average of $19 billion, Matthew Bartolini, Head of SPDR Americas Research at State Street Global Advisors told Traders Magazine during a call.

“U.S. large caps were favored over small caps, while bargain hunters allocated more to emerging markets than any time since January of this year, right as the region posted its best return since then,” Bartolini said.

On the sector level, Health Care ETFs attracted the most assets ($1.8B) of any sector category in November. Health Care wasn’t the only defensive sector selected by investors, as Consumer Staples took in nearly $1 billion during the month.

Fixed-income ETFs rebounded after posting outflows for the first time in 38 months in October, taking in a little over $13 billion. Bartolini said the November haul was the class’ 6th highest monthly total on record. Here flows were concentrated in two key areas, Government and Aggregate bond exposures, at $5.1 billion and $8.9 billion, respectively. The balance of areas saw outflows.

“While this is a moment to celebrate, it is unlikely that there will be an award ceremony at the end of the year for fixed income ETFs,” he said. ”The record- breaking total of $126 billion amassed in 2017 is likely to stand, unless in December fixed income ETFs go on to post flows that are $29 billion more than their best monthly flow total ever ($17 billion).Nonetheless, the category took in 13.7% of its start-of-year assets so far, a figure more than double that of equities and the reason why bond ETFs picked up market share in 2018.”

With both fixed income and equity ETF strategies very much unlikely to break their 2017 records, ETFs overall are going to fall short of the staggering $466 billion haul from 2017. But, Bartolini said that doesn’t mean it hasn’t been a good year so far, as the $260 billion amassed through eleven months in 2018 is “nothing to be ashamed of.” However, if the year ended today, that would be the lowest annual fund flow total in nearly two years, falling below totals for both 2017 and 2016.

“Luckily, the year isn’t over yet. The bad news is, however, that ETFs have averaged $23 billion of inflows a month in 2018, and a flow of that size would still put ETFs below the $290 billion from 2016,” he explained. “The good news is that flows in the month of December average $42 billion over the last 5 years. If ETFs hit the bid on the December average, the yearly flow would surpass $300 billion – the first time ETFs had two consecutive years of annual flows over $300 billion, underscoring the persistent interest in utilizing ETFs within portfolios.”

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