ETF investors hunker down in cash

Two ETFs that invest in Treasury bills drew a combined $1.5 billion last week

Nov 5, 2018 @ 4:09 pm

By Bloomberg News

Whiplashed by surging bond yields and volatile stocks, more money managers are seeking refuge in the safety of cash-like assets.

The top two U.S.-listed exchange-traded funds that invest in Treasury bills drew a combined $1.5 billion in the week ended Friday, the fifth-largest allocation on record.

Investors, fretting about rising U.S. long-dated real yields and febrile market sentiment, are keeping their powder dry. An iShares fund that invests in Treasuries with one- to three-year maturities received $1.2 billion last week, its heaviest inflow in more than four years.

(More: Faced with market rough patch, stock pickers fail to shine)

For good reason: The midterm elections and the Federal Reserve meeting also raise the prospect of elevated price swings across assets.

"The increasing allocation of funds to the U.S. money market suggests that conviction about the U.S. asset outlook is falling — a typical sign late in the financial cycle, and a sign that volatility is likely to begin rising soon," Morgan Stanley strategists led by Hans Redeker wrote in a recent note.

Lured by positive returns on securities largely bereft of duration risk, ultra-short passive vehicles listed in the U.S. have drawn $26.2 billion so far this year, growing their assets under management by 46%, according to data compiled by Bloomberg.

The flows underscore how tighter liquidity is curbing investors' enthusiasm for venturing into riskier stocks and emerging-market credits.

"Money market instruments are more easily liquidated and repatriated than long-term assets, suggesting that foreign holdings in money markets are more sensitive to market conditions," the Morgan Stanley strategists conclude.

(More: Shorts piling into stock ETFs reach fever pitch)

0
Comments

What do you think?

View comments

Most watched

INTV

Young advisers envision a radically different business in five years

Fintech and sustainable investing are two factors being watched closely by some of the 2019 class of InvestmentNews' 40 Under 40.

INTV

Schwab's Jeff Kleintop: Prep for volatility given China trade uncertainties

China could be considered a developed market in five to seven years , according to Jeff Kleintop, chief global investment strategist, Charles Schwab.

Latest news & opinion

TIAA exits the life insurance business

The move is a big deal for RIAs, experts say, since TIAA was one of only a few insurers to offer fee-only life policies.

Advisers step up efforts to help clients manage student loan debt

As some Democrats campaign to wipe the slate clean, financial planners focus on limiting the amount students borrow.

Funding for Reg BI, other SEC advice reform efforts denied in Waters amendment

House likely to approve measure that effectively kills rule package, but it faces uphill battle in Senate

Wall Street lashes out at Sanders' plan to pay off student debt with a securities trading tax

Financial pros argue that a transaction levy will hurt mom-and-pop investors along with investment houses.

GPB paid B-Ds and reps steep commissions to sell troubled private placements

GPB paid commissions of 9.3%, or $167 million altogether, on the firm's private placements.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print