- Undeterred by the market’s decline, ETFs took in $46 billion in September, their 10th month in a row with over $40 billion in inflows.
- Equity ETFs outpaced bond ETFs for the 11th month in a row, taking in $18 billion more in September and sector ETFs set a record streak of 12 months in a row with inflows.
- Positioning remained consistent within bond ETFs. Treasury Inflation-Protected Securities (TIPS) funds took in $3 billion, their 17th month in a row with inflows, and Bank Loan funds added nearly $1 billion.
Right on cue with the weather starting to change in the Northeast, the market’s direction changed in September. Heading into the month, roughly 70% of the firms in the S&P 500 Index were trading above their 50-day moving average. Thirty days later, only 25% of firms are above that threshold, and the broad benchmark’s relative strength measure declined every day in the last the week of month.
Compounding the negative returns in stocks, core global bonds also fell hard. In fact, after posting a 1.8% decline in September, their sixth month of losses in 2021, the year-to-date return fell to a negative 4.1%.1 If the year ended today, this would be the worst yearly decline from core global aggregate bonds since 1999.
Yet, despite the weak returns, investors’ risk-on positioning has not been severely altered.
Flows Ready to Keep Breaking Records This Fall
ETFs are smashing records like punk teenagers smashing pumpkins once the sun goes down. Fund flows are already above prior-year highs, and with the fourth quarter typically representing the largest flows of any quarter ($128 billion versus $88 billion for Q4 versus Q1 to Q3 averages) the full-year figures are likely to increase. In fact, our five-factor model now indicates flows could reach $812 billion, or 61% higher than 2020’s record $505 billion. An uptick not unlike the increase in hearing “Happy Fall Y’all” nowadays.
These record-setting flows have been fueled by record-setting participation from all ETFs. Out of the ETFs this year that have witnessed flows (positive or negative), 67.5% have registered inflows. This marks the largest rate of participation in the past ten years.
Beyond the record-breaking flows, the trends shown below indicate both broad-based depth and persistency — a strong sign for ongoing secular adoption of ETFs within portfolios from a diverse group of investors with differing motivations.
Percent of Funds with Inflows Per Month
1 Bloomberg Finance, L.P. as of September 30, 2021 based on the return of the Bloomberg Global Aggregate Bond Index.
Bloomberg Global Aggregate Bond Index
A broad-based flagship benchmark that measures the investment grade, global fixed-rate taxable bond market.
MSCI ACWI Index
A market-capitalization-weighted stock market index that measures the stock performance of the companies in developed and emerging markets.
S&P 500® Index
A market-capitalization-weighted stock market index that measures the stock performance of the 500 largest publicly traded companies in the United States.
Originally Posted on October 7, 2021 – September Flash Flows: Flows Remain Strong Amid the Market’s Fall
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