Income Hunters Buoyed ETF Flows in May

by Kyle Woodley | June 6, 2012 6:45 am

Income Hunters Buoyed ETF Flows in May

If nothing else, ETFs are hardy little buggers.

According to an IndexUniverse report[1], overall flows into U.S.-listed exchange-traded products were about $4.11 billion in May. Of course, that was thanks to investors’ bloodlust for bonds, which mostly offset their rapid-fire exodus from equities (by about 6%-7%, if you’re counting), putting ETF total assets just below April’s record $1.138 trillion under management.

Surprise, surprise.

A fantastic collusion of eurozone bleeding, concerns over slowdowns in the roaring emerging markets of China and India, and a mass checkout for summer have made the line for fixed-income funds longer than the thrill-seekers’ queue for Cedar Point’s Maverick[2]. Even a record-low yield that’s dangerously approaching CD levels isn’t scaring people off from 10-year Treasurys.[3]

Investors rushed to safety in May, with seven of the month’s 10 most-popular funds focused on fixed income — including the life of the party, the Vanguard Total Bond Market ETF (NYSE:BND[4]), which brought in $1.23 billion, according to IU data. Vanguard rode the success of BND and other funds to become the top firm in asset gathering, adding $6.7 billion in assets, while BlackRock’s (NYSE:BLK[5]) iShares and State Street’s (NYSE:STT[6]) Global Advisors division saw respective outflows of $683.5 million and $1.78 billion.

The month’s new funds also reflected the quest for yield. While only eight ETFs launched last month[7], six were targeted toward income investors — though two nefariously so[8].

However, investors were at least discerning about their bonds in May. Two junk-bond ETFs — the SPDR Barclays Capital High Yield Bond ETF (NYSE:JNK[9]) and iShares iBoxx $ High Yield Corporate Bond Fund (NYSE:HYG[10]) — saw a respective $1.17 billion and $522.1 million in outflows, making them IndexUniverse’s Nos. 2 and 9 “Biggest Losers.” JNK has more than wiped out all its gains through the first four months of 2012, finishing May down 1% for the year.

IndexUniverse’s No. 1 “Biggest Loser” was the iShares MSCI Emerging Markets Index Fund (NYSE:EEM[11]), which saw $1.54 billion head for the doors.

The flight from junk bonds smacks in the face of news from earlier in the month that Vanguard would be closing its High-Yield Corporate Fund (MUTF:VWEHX[12]) to “most new accounts” because of excessive cash inflows[13].

The full report can be viewed at IndexUniverse.[14]

Kyle Woodley[15] is the assistant editor of InvestorPlace.com[16]. As of this writing, he did not hold a position in any of the aforementioned securities. Follow him on Twitter at @KyleWoodley[17].

Endnotes:
  1. an IndexUniverse report: http://www.indexuniverse.com/sections/news/12083-may-etf-flows-a-time-for-bond-funds.html
  2. Cedar Point’s Maverick: http://www.cedarpoint.com/rides/Roller-Coasters/Maverick
  3. isn’t scaring people off from 10-year Treasurys.: http://investorplace.com/2012/06/my-favorite-sector-for-summer-bonds/
  4. BND: http://studio-5.financialcontent.com/investplace/quote?Symbol=BND
  5. BLK: http://studio-5.financialcontent.com/investplace/quote?Symbol=BLK
  6. STT: http://studio-5.financialcontent.com/investplace/quote?Symbol=STT
  7. only eight ETFs launched last month: http://investorplace.com/2012/06/new-bond-etf-has-you-covered-cobo/
  8. nefariously so: http://investorplace.com/2012/05/double-dividend-funds-slow-down/
  9. JNK: http://studio-5.financialcontent.com/investplace/quote?Symbol=JNK
  10. HYG: http://studio-5.financialcontent.com/investplace/quote?Symbol=HYG
  11. EEM: http://studio-5.financialcontent.com/investplace/quote?Symbol=EEM
  12. VWEHX: http://studio-5.financialcontent.com/investplace/quote?Symbol=VWEHX
  13. because of excessive cash inflows: http://investorplace.com/2012/05/vanguard-turns-away-non-wealthy-high-yield-hunters/
  14. IndexUniverse.: http://www.indexuniverse.com/sections/news/12083-may-etf-flows-a-time-for-bond-funds.html
  15. Kyle Woodley: http://investorplace.com/author/kyle-woodley/
  16. InvestorPlace.com: http://investorplace.com/
  17. @KyleWoodley: https://twitter.com/#%21/kylewoodley

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