Investors rotated toward more defensive holdings, and
continued to try to find values in sectors of the market that have been left
out of 2020’s big stock-market rally, according to exchange-traded fund flows
data covering the month of September.
Data from CFRA’s First Bridge database showed several
notable patterns among the 20 ETFs with the largest inflows. Those are shown in
the table below.
Among the trends in September: investor interest in bond
funds, which has been on fire all year, cooled slightly. Only four bond funds were
represented among the top 20, while eight made it onto the year-to-date top 20.
And the four with the biggest gains in September represented “a tilt toward
defensiveness,” said Todd Rosenbluth, CFRA’s head of mutual fund and ETF research.
There’s only one purely corporate bond fund on September’s
list, and it’s ultrashort term. The rest are broad-market funds. Compare that
to the year to date, when iShares iBoxx $ Investment Grade Corporate Bond ETF
LQD, +0.20% is the fifth-biggest flows gainer, picking up $15.4 billion so far.
Conversely, stock fund investors in September tried,
tentatively, to leave the perceived safety of big growth strategies, which have
dominated this year. The iShares Edge MSCI USA Value Factor ETF and Vanguard
Value ETF picked up big flows, and one out-of-favor sector, industrials, also
had a strong month. It’s hard to call this the start of a real rotation,
Rosenbluth said in an interview, but it’s more than a “headfake. Investors are
dipping their toes in cautiously,” he added.
Also of note in September: Vanguard dominated incoming
money. It had 8 of the top 20 gainers, and 43% of dollar flows.
The company tends to attract investors who are making
portfolio allocation changes, not traders, Rosenbluth explained. Unlike its competitors,
iShares and State Street, which can easily chart massive inflows and outflows
for the same funds as traders use them for positioning, Vanguard flows “tend to
be steadier” since investors are using them for buy-and-hold purposes. For the
company, “this was a particularly impressive month,” Rosenbluth said.
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