Exchange-traded funds have ended their 23-month-long winning streak of positive flows, according to a new report from Cerulli Associates, a global analytics firm.
"ETFs snapped a streak of 23 straight months of positive flows dating back to January 2014, and bled $1.8 billion in January," the report states. "While the outflows, combined with poor January market returns, led to a 4.7% drop in assets, ETFs still maintain more than $2 trillion in total assets."
According to Cerulli, State Street is the only major player that lost significant market share, mostly as a consequence of its S&P 500 tracking ETF (SPY), which purged assets of $107 billion over the past year. Cerulli ranked the top ETF sponsors by assets as of January 2016, and State Street still came in at third – behind Vanguard (No. 2) and iShares (No. 1) – despite its major losses. Of the top-10 ETF sponsors, Guggenheim (No. 8) and PowerShares (No. 4) were the only other sponsors to suffer a drop in market share during the past 12 months.
Meanwhile, Deutsche X-Trackers tripled its market share over the past 12 months – from 0.3% in January 2015 to 0.9% in January 2016 – and comes in at No. 10 among the top ETF sponsors by assets.
Looking at ETF assets by asset class, Cerulli finds U.S. equity assets demonstrated a wide range activity over the past 12 months, with a high of $940 billion in December of 2015 and a low of $850 billion in September.
"Given that the three-largest S&P 500 tracking funds comprise 32% of all U.S. equity assets, it can be expected that there is a strong correlation between S&P 500 market value and U.S. equity assets," the report states.
Meanwhile, international equity ETFs, which amassed more than $100 billion flows during 2015, slumped in January and purged $3.1 billion, according to Cerulli.
Cerulli says outflows were driven by diversified emerging market funds, which endured outflows of $3.6 billion over the past 12 months.
International equity's slow start to 2016 was also driven by outflows from currency-hedged funds.
"The script flipped on many currency-hedged ETFs during the tail end of 2015," the report states. "An array of macro-economic factors caused investors to become anxious about foreign equity exposure."
A large portion of WidsomTree's January outflows came from investors pulling funds from its Japan-hedged equity and European-hedged equity ETFs. According to Cerulli, these funds suffered outflows of $966 million and $810 million, respectively.
