ETFs see outflows for first time since 2016

While investors fled domestic stock ETFs in February, international funds gained new money

Mar 28, 2018 @ 1:49 pm

By John Waggoner

Exchange-traded funds saw net outflows in February, the first monthly exodus since 2016, according to Cerulli Associates.

As Standard & Poor's 500 stock index dropped 3.69% last month, investors dropped domestic stock ETFs like an annoyed cobra, selling $14.6 billion in the month. The biggest loser was SPDR S&P 500 ETF (SPY), which had net outflows of $19.6 billion.

"A lot of institutions use the ETF for cash management," said Brendan Powers, senior analyst for Cerulli. "The ETF owns 8% of ETF market share, and it's going to be a factor in net flows."

As has been the trend throughout much of the bull market, flows to international ETFs remained positive, gaining a net $10.5 billion in new money. So far this year, international ETFs have gained $31.5 billion in net new cash. The biggest winner: iShares Core MSCI EAFE ETF, which welcomed $6.9 billion in February. Advisers are often a major driving force behind inflows to mutual funds and ETFs.

Within sector ETFs, the biggest losers were health care and industrial ETFs. Industrial ETFs may have sunk because of trade war talk, sparked by President Trump's imposition of tariffs on steel and aluminum. Despite the sell-off in technology stocks, tech ETFs saw modest inflows, Mr. Powers said.

Outflows from domestic funds and ETFs have continued in March, according to the Investment Company Institute, the funds' trade group. Combined estimated outflows from domestic ETFs and mutual funds hit $52.1 billion from the week ended Feb. 7 through the week ended March 21. World stock funds gained an estimated $38.8 billion.

For the week ended March 21, when the S&P tumbled 1.88%, combined domestic ETF and mutual fund saw $17.1 billion flee, the ICI said, while global funds and ETFs ushered $3.3 billion in the door. The MSCI Europe, Australasia and Far East index fell 1.43% in the same period.

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