ETF Industry Punched With Big Monthly Outflows

MarketsETF Trends

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After years of steady growth, the ETF universe has been punched with big back-to-back monthly ETF outflows - the first since the financial downturn.

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ETFs saw negative outflows in March, with most of the redemptions coming out of large-cap U.S. equity funds, reports Ryan Vlastelica for MarketWatch.

According to FactSet data, U.S.-listed stock funds saw $8.78 billion in outflows, which more than offset the $3.44 billion that was funneled into fixed-income safety plays. Among the worst off, U.S. large-cap funds experienced $22.1 billion in outflows, followed by Europe total market funds focusing on developed economies that had $2.8 billion in outflows.

Related: India ETFs Among Worst 2018 Performing Markets

The SPDR S&P 500 ETF (NYSEARCA: SPY) and iShares Core S&P 500 ETF (NYSEARCA: IVV), two of the most popularly traded ETFs on the market, both experienced $12.2 billion and $9.8 billion in outflows over the past month, respectively.

Headline Risks Triggers Risk-Off ETF Selling

“The outflows reflect a reallocation of capital given what’s been going on in the market over the past several weeks. There’s a lot of headline risk, which caused the market to hit a bit of a banana peel in the final weeks of the quarter,” Matthew Bartolini, Head of SPDR Americas Research at State Street Global Advisors, told MarketWatch.

After the phenomenal January month where U.S. markets hit all-time highs, stocks took a sudden nose dive and suffered through extended volatility over the February and March months. The sudden prospect of a trade war, inflationary fears and central bank policies all contributed to the heightened uncertainty in the markets that dragged U.S. benchmarks into correction territory.

Related: SEC Streamlines ETF Process But Presents Risks

On the other hand, international and small-cap funds still showed some strength. U.S. small-cap funds added $2.84 billion while global stocks for developed markets excluding the U.S. attracted $5.5 billion in inflows.

“The inflows into international and small-cap funds shows that investors were just reducing their large-cap exposure, they weren’t shying away from ETFs in general,” Bartolini added. “There continues to be a generational shift toward ETFs; even with the outflows, usage continues to go higher.”

For more information on the ETF industry, visit our ETF performance reports category.

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