Amid last week’s volatility, ETF traders shifted funds moderately towards Commodities and Bond funds and away from traditional growth and blend equity sectors.
- Commodities: Two of 10 funds with greatest inflows were the GLD mega-fund and its little sibling SLV, receiving $600M and $200M respectively in capital inflows during the shortened week.
- Fixed Income: Bond fund IEF had greater than $200M of fresh capital flow in the week, increasing total shares outstanding by >5%. Others, including BND and AGG, had similarly sized infusions of capital. Meanwhile, investors shifted away from short term bills with the 1-3 month T-Bill fund BIL having more than 16% of shares redeemed last week alone.
- Equity Indexes: Traders lost some appetite for the major equity indices last week. SPY, the mega S&P 500 index ETF, saw redemptions worth almost $3B and QQQ, the Nasdaq 100 fund, had outflows of $500M+.
- Volatility: One of the most dynamic ETFs traded today is the VXX, which is sometimes held as a hedge to long equity positions. Interestingly, VXX lost nearly 10% of its assets to redemptions last week, even as the share price gained 16%. Clearly the hot money is cashing in profits as the VXX pays off.
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Fund flows in the universe of speculative short and leveraged ETFs were mixed last week. While the overall trend was for moving risk capital into bear-oriented funds and cashing out of bullish funds, there were notable exceptions.
- Short Equity: Several bear funds, such as SH (short S&P 500), SDS (2x short), and RWM (short Russell) received large net inflows of new capital in the volatile week, potentially as traders hedged net long portfolios.
- Sector Rotation: Speculators’ appetite for being long financials increased significantly, with FAS (3x long financials) growing its shares outstanding by 7.7% this week. Money also rotated away from basic materials (SMN) and energy (ERX, UGL)
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.