ETF Investors Reshuffle Holdings as Landscape Changes

by: IndexUniverse

By Matthew Hougan

With equities slumping, ETF investors are pushing money into fixed-income, commodities and more.

The numbers are striking.

On a percentage basis, through July 31, U.S. ETF assets were heavily weighted into equities. Here are the numbers from the National Stock Exchange. 

Asset Category

Total AUM ($USM)

Share of Industry Assets

Domestic Equities

342,729

58%

International Equities

158,280

27%

Fixed Income

46,779

8%

Commodities

38,913

7%

Currencies

6,022

1%

TOTAL

592,724

100%

But over the last year, cash flows—new money investors are putting to work in the space—have been very different. Here are the year-to-date cash flows into ETFs for the same asset categories.

Asset Category

Total AUM ($USM)

Share of New Cash Flows

Domestic Equities

11,902

34%

International Equities

1,213

3%

Fixed Income

12,357

35%

Commodities

7,732

22%

Currencies

2,191

6%

TOTAL

35,394

100%

The lack of flows into international stocks is surprising, at just 3% of total new cash flows. Even with that market down, you'd think the long-term rotation into international exposure would continue.

More surprising to my mind, however, is the huge flows into fixed income, at $12 billion and 35% of total cash flows, respectively. Commodities were also impressive, at 22% of new cash flows and nearly $8 billion of assets.

The story here is obvious but also telling: As equities slump, investors are moving into alternative assets. But at the same time, the ETF industry is aggressively moving into these new markets as well. Until 2007, there were just a handful of fixed-income ETFs on the market; today there are dozens, from a variety of providers. Similarly, there are more than 40 commodity-focused ETFs and ETNS on the market today, and more launching all the time.

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