Where Is The ETF Money Flowing?

By: Spencer Israel

ETF flow data tells us where investors are allocating capital. Though this data does not always correlate to price action, looking at flows on a weekly, monthly, and quarterly basis can help us see which themes traders and investors are bullish/bearish on. 

With August in the books, we can look back and see what stood out during the month. Let’s follow the money and see where it goes. 

What The Big Fish Did
As is typically the case, the funds with the largest AUM were also the funds with the greatest flows.

The two largest ETFs, the SPDR S&P 500 ETF (SPY) and iShares Core S&P 500 ETF (IVV), led the way in terms of outflows during August, with approximately -$2.8 billion and -$992 million of outflows respectively. 

In terms of inflows, the funds that took in the most money during August were the iShares Core MSCI EAFE ETF (IEFA), Vanguard Total Stock Market ETF (VTI), and Vanguard Total Bond Market ETF (BND). Each fund took in roughly $2 billion in the month. 

They were followed by the Invesco QQQ ETF (QQQ) and iShares Russell 2000 ETF (IWM), which took in $1.8 billion and $1.6 billion respectively. 

Inflow Themes
In terms of sector funds, investors poured money into the financial, utility, industrial, and consumer discretionary sectors last month. 

The Financial Select Sector SPDR Fund (XLF) took in nearly $980 million, Utilities Select Sector SPDR Fund (XLU) took in $885 million, Industrial Select Sector SPDR Fund (XLI) took in $791 million, and Consumer Discretionary Select Sector SPDR Fund (XLY) took in $278 million.

Value

Despite their relative underperformance over the last decade, and especially in 2020, two of the largest value-focused ETFs saw significant inflows last month.

The iShares Edge MSCI USA Value Factor ETF (VLUE) and Vanguard Value ETF (VTV) took in $981 million and $569 million respectively. In other words, there’s still a substantial amount of capital betting on a shift away from growth stocks to value. 

ARK Invest

The actively managed ETF provider led by Cathie Wood has had a great year thanks to large allocations to a number of high-flying stocks, particularly Tesla.

Two of the firm’s funds, the ARK Innovation ETF (ARKK) and ARK Next Generation Internet ETF (ARKW), were among the leaders for inflows in August. ARKK took in roughly $972 million and ARKW $315 million. A third fund, ARK Genomic Revolution ETF (ARKG) also took in $245 million. 

Outflows Themes
Investors pulled money out of leading health care, materials, and real estate funds last quarter. 

The SPDR S&P Biotech ETF (XBI) had -$378 million of outflows, followed by the Materials Select Sector SPDR ETF (XLB) with -$231 million, Vanguard Real Estate Index Fund (VNQ) -$223 million, and iShares U.S. Healthcare ETF (IYH) -$183 million. 

Growth

Just as value funds experienced large inflows last month, three of the largest growth ETFs had significant outflows.

They were led by the Vanguard Growth ETF (VUG) which lost -$1.6 billion, iShares Russell 1000 Growth ETF (IWF) which lost -$1 billion, and iShares Core S&P U.S. Growth ETF (IUSG) which lost -$488 million. 

China

Perhaps driven by increased tensions between the U.S. and China surrounding the sail of TikTok (among various other disputes between the two), investors pulled money from several major China ETFs last month.

The Xtrackers Harvest CSI 300 China A-Shares Fund (ASHR) lost roughly -$332 million, the iShares China Large-Cap ETF (FXI) lost roughly -$196 million, and the KraneShares CSI China Internet ETF (KWEB) lost roughly -$111 million. 

The author is long ARKW and KWEB.

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