Hot Areas Of Last Week And Their ETFs

Hopes for Trump’s tax reforms, abating North Korea fears, lower-than-expected damage from Hurricane Irma and record stock market highs rekindled the love for U.S. equity ETFs last week. This is especially true as investors’ poured $1.9 billion into U.S. equity ETFs, representing the biggest inflows in 13 weeks, according to Bank of America Merrill Lynch (NYSE:BAC).

Meanwhile, U.S. Treasury funds also enjoyed their biggest inflows in 62 weeks with $2.2 billion inflows in the wake of the quest for yield while investment-grade bond ETFs pulled in $4.8 million of new money, marking the 38th consecutive week of inflows.

Per etf.com, overall ETFs gathered about $11.6 billion capital last week, bringing year-to-date inflows to a record $319.9 billion. U.S. equity ETFs led the way with $5.6 billion inflows, closely followed by $3.3 billion in U.S. fixed income ETFs and $2.5 billion in international equity ETFs.

Craze for Treasury ETFs Continues

Despite the sell-off early last week, the craze for two Treasury ETFs, iShares 20+ Year Treasury Bond ETF (V:TLT) andiShares 3-7 Year Treasury Bond ETF (V:IEI) , continued for the second consecutive week (read: U.S. Treasury ETFs: What Lies Ahead?).

TLT topped the list of inflows gathering $1.3 million last week that propelled the fund’s asset base to $9.6 billion. It tracks the ICE U.S. Treasury 20+ Year Bond Index, holding 33 securities in its basket. The fund has an average maturity of 26.04 years and effective duration of 17.65 years. On the other hand, IEI with an asset base of around $8.2 billion, pulled in about $510.2 million in capital. It provides exposure to intermediate-term U.S. Treasury bonds with average maturity of 4.79 years and effective duration of 4.50 years.

Both funds charge 15 bps in annual fees and have a Zacks ETF Rank #3 (Hold). TLT shed 1.7% last week while IEI lost 0.6%.

Small Cap ETFs Shine

Small cap ETFs, which are the largest beneficiaries of the corporate tax cut, saw the largest inflows in six weeks according to Bank of America Merrill Lynch. That said, Vanguard Small-Cap ETF (TO:VB) and Vanguard Small-Cap Growth ETF (TO:VB) are leading in terms of asset inflows of $449.1 million and $377.1 million, respectively (read: Three Reasons to Bet on Small Cap ETFs Now).

VB offers diversified exposure to small-cap stocks by tracking the CRSP US Small Cap Index. It holds a basket of 1439 stocks with none holding more than 0.3% of assets. Financials dominates the portfolio at 26%, followed by industrials (20.2%) and technology (11.7%). The ETF is popular with AUM of $19.8 billion. Meanwhile, VBK targets the growth corner of the small-cap segment, holding 684 stocks in its basket. The fund is widely diversified across a number of sectors and securities. Financials, industrials, technology, health care, and consumer services make up for double-digit allocation each and none of the securities holds more than 0.7% of total assets in the basket. The product has amassed $6.7 billion in its asset base.

Both funds charge a lower expense ratio of 0.06% and 0.07%, respectively, and have a Zacks ETF Rank #3. VB gained 2% while VBK added 1.5% last week (read: Will Low Cost ETF Strength Make Vanguard Top Asset Manager Soon?).

Emerging Market ETFs Gain Traction

Investors also favored emerging market funds as these appear cheaper than the developed-market counterparts. Notably, the two popular funds, Vanguard FTSE Emerging Markets ETF VWO and iShares Core MSCI Emerging Markets ETF IEMG, gathered over $420 million in assets each (read: Emerging Markets Leading This Year: 5 Top-Performing ETFs).

China dominates the portfolio of both funds with more than one-fourth share. Both have a diverse approach to a number of components with information technology as the top sector and charges 14 bps in annual fees. Both funds have a Zacks ETF Rank #3. However, VWO is more popular with AUM of $63.7 billion while IEMG has $37.8 billion in asset base. Both the ETFs are up 1.2% and 1.6%, respectively.

Other U.S. Equity ETFs Made to Top 10

Mid-cap fund Vanguard Mid-Cap ETF VO was the second asset gainer, accumulating $852.3 million in capital. Financial Select Sector SPDR Fund XLF was also on the top-10 list, pulling in $395.7 million in its asset base. VO gained 1.3% last week while XLF rose 2.8%. The former has a Zacks ETF Rank #3 while the latter has a Zacks ETF Rank #2 (Buy).

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ISHARS-20+YTB (TLT): ETF Research Reports

SPDR-FINL SELS (XLF): ETF Research Reports

ISHARS-3-7YTB (IEI): ETF Research Reports

VIPERS-SM CAP (VB): ETF Research Reports

VIPERS-MID CAP (VO): ETF Research Reports

VANGD-FTSE EM (VWO): ETF Research Reports

VIPERS-SC GRWTH (VBK): ETF Research Reports

ISHARS-CR MS EM (IEMG): ETF Research Reports

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Zacks Investment Research