US ETF money in April went to emerging and developed markets, and even high yield bonds as risks faded.
US-based ETF investors are branching out more into international waters to “put their risk money to work”, shifting aside temptations to park most of their capital in domestic securities.
“We did see in this last month some more international exposure: developed markets, emerging markets – really across the board,” ETF.com CEO Dave Nadig told CNBC.
“[We saw] some money flowing into Eurozone ETFs which we haven’t seen in a while – maybe a little of a post-Brexit trade there,” he added.
Europe Versus The UK
“I think we’re entering a calmer period where Europe versus the UK seems like a trade you might want to make,” Nadig said.
ETFs tracking UK stocks gained more than €1.4 billion year to date, while European stocks gained around €10.7 billion over the same period, TrackInsight data shows.
European funds saw a very strong month in April. The iShares MSCI Eurozone ETF (EZU) increased its assets under management by 10% to more than $26 billion.
“That’s a natural reaction to the slowdown in the rally we had here in the US,” explained Nadig.
“People are looking to putting this risk money to work, so they’re looking at international emerging markets, even high yield bonds.”
Emerging Markets Gaining Favour
Emerging markets funds saw inflows, like the iShares Core MSCI Emerging Markets ETF (IEMG) and the Vanguard FTSE Emerging Markets ETF (VWO) increased assets by about 5% each.
The Trump trade means there have been continued outflows from Mexican and Japanese equities, the few equity sectors across the world that lost out in April, however, their outflows were much less strong than during the first quarter of the year.
Financial stocks were also “cooling on the prospect of any significant tax or regulatory changes this year,” said Nadig, which is a strong turnaround after President Trump had promised to rule out regulations imposed by his predecessor after the 2008 credit crash.
The two flagship gold miner funds (GDX and GDXJ) also lost assets last month after strong gains earlier this year.
ETFs have gathered $170 billion so far in 2017, and around $40 billion every month: if the current pace continues ETFs are on track to gaining a record $500 billion for the year.
