While the first half 2015 ETF flows were driven by international equities, more than half of July’s $23 billion of net inflows stemmed from U.S. equities according to etf.com. Three different ETFs tied to the S&P 500 Index had inflows of more than a $1 billion.
Though S&P 500 earnings have come in stronger than S&P Capital IQ consensus forecasts, we think the inflows are a continued reminder that investors are increasingly looking to passive strategies for their large-cap exposure.
As we noted in a popular article titled “Large Cap Funds: Active vs. Passive” only one in four actively managed mutual funds outperformed the “500” in the three-year period ended 2014. To learn more about this topic, please view a replay of the August ETF Analyst Hour that is included in this report.
During July, U.S. fixed income ETFs gathered $6.6 billion of fresh money, even as some prominent investors questioned whether the products would cause liquidity challenges for the fixed income market.
S&P Capital IQ tackled this topic in another article titled “Liquidity of Bond ETFs” with a review of how bond ETFs performed during recent periods of market stress, including when the Fed indicated it would taper its bond buying program and when PIMCO underwent unexpected leadership changes. We think that bond ETFs provide transparency to opaque bond market.