Multi-factor ETFs have gained solid inflows since the February dip as investors are keen to diversify and avoid market timing.
According to data from TrackInsight, multi-factor stocks have gained $1.9 billion since the start of the year while average returns are around minus 0.4% over this period.
Over the last month, since the market fell from its record high and the volatility index spiked, multi-factor stocks tracked by ETFs, which seek to smooth out the ups and downs of the broader market, have gained an average of 3.4%. Flows have continued to rise in this time by around $627 million.
“Based on fund flows, investors are not waiting for an ETF to hit an anniversary before investing, as many of these young products have passed the $100 million milestone,” wrote Todd Rosenbluth, director of ETF and mutual fund research at CFRA Research.
JPUS delivers in multi-factor category
One example of this is the JPMorgan Diversified Return US Equity ETF (JPUS), which has $492 million under management and is the provider’s largest US equity ETF. JPUS, contrary to its peers, is up over 2.4% year to date and has gained around $80 million since 1 January.
Costing 0.29% per year, it tracks the Russell 1000 Diversified Index which applies a screening process to compile a list of 526 companies that have value, quality and momentum characteristics. It has beat the S&P 500 and Russell 1000 indexes since it was launched in September 2015.
Multi-factor ETFs appealing after market dip
Meanwhile, industry experts are debating whether the market dip impacted ETFs.
Data from ETFGI found that net outflows from US and Canadian equity ETFs amounted to $23.5 billion last month following the market correction, as well as outflows of $5 billion from ETFs linked to US corporate bonds. Such outflows were the first in two years, and several short volatility funds were also closed during the spike in volatility.
However, ETFs continued to trade during the sell-off and liquidity did not dry up, a concern floated by some industry participants. Trading spreads and index tracking error ranges did not move for the largest and most liquid US ETFs last month, according to a study by FactSet.