ETF Asset Report For April 2018: Bonds Top

The month of April was mixed with earnings showing promise and broader markets returning decent returns despite rising yields and trade tensions. Oil has been on an uptrend. Overall, SPDR S&P 500 ETF (NYSE:SPY) (AX:SPY) gained about 3.5% in a month’s time (as of Apr 27, 2018), SPDR Dow Jones Industrial Average ETF (V:DIA) rose 2.9% while Nasdaq-100-bsed ETF PowerShares QQQ ETF QQQ jumped 4.2%.

Against this backdrop, let’s find out the top gainers in terms of asset growth in April (as of April 27, 2018) (source: etf.com).

Inside Investors’ Love for Bond ETFs

Investors would be surprised to know that six out of 10 top asset gatherers in April turned out to be bond ETFs. This happened despite a flare-up in rising rate tensions. U.S. Treasury yields were on an uptrend on a host of factors. While the 10-year benchmark U.S. Treasury yield crossed the 3% mark for the first time since January 2014, two-year U.S. yields are at 2008 highs(read: 8 Inverse Bond ETFs to Profit Out of Rising Yields).

Chances of a massive supply of government debt in the near term and the likelihood of the fourth rate hike led to gyrations in the fixed-income world in late April. The month started with benchmark treasury yielding 2.73%, which was the lowest in the month while the highest yield was 3.03% as of Apr 25.

Inside Winning Bond ETFs

Still, the top asset creation of $2.53 billion was noticed in iSharesShort Treasury Bond ETF (AX:SHV) . Since short-duration bonds are less sensitive to rising rates, investors may have chosen to hoard assets in it. However, long-term bond fund iShares 20+ Year Treasury Bond ETF (V:TLT) too addedabout $1.64 billion. Trade tensions and selloffs in the tech space probably have led investors to seek safety in this long-term bond fund.

Moreover, iShares Core U.S. Aggregate Bond ETF (AX:AGG) generated $1.61 billion in assets, iShares Floating Rate Bond ETF FLOT raked in $1.21 billion (as this is a great bet in a rising rate environment), iShares iBoxx $ Investment Grade Corporate Bond ETF LQD saw inflows of $926.1 million while iShares 1-3 Year Treasury Bond ETF SHY generated about $850.7 million in assets.

Emerging Markets Gain Investors’ Favor

Emerging market investments continued to look up. The fundamentals are pretty pro-growth in emerging markets at the current level unlike in 2013 (famous for taper-tantrum). iShares Core MSCI Emerging Markets ETF IEMG hauled in about $1.84 billion in assets (read: Should You Buy EM ETFs Despite Trade War & Other Concerns?).

Developed Market Tops With Low Fee Products

Developed markets including the United States were also on investors’ radar. iShares Core MSCI EAFE ETF IEFA tracing Europe, Australia and Far East was among the toppers with about $1.81 billion inflows.

Notably, despite targeting the EAFE market, iShares MSCI EAFE ETF EFA lost about $887.5 million in assets. This could be because of expense ratio differentials and EFA charges (32 bps in fees) much higher than IEFA (8 bps in fees) (read: Q1 ETF Inflows Dive at BlackRock: Tough Road Ahead?).

Same was the situation with the U.S. ETFs. iShares Core S&P 500 ETF IVV, which charges 4 bps in fees, gained about $1.78 billion in assets while SPDR S&P 500 ETF Trust (AX:SPY) ), which charges 9 bps, saw an outflow of about $3.56 billion worth of assets.

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