May ETF Asset Flow: Gold Wins, EM Loses

The month of May is characterized by the age-old adage “sell in May and go away.” The proverb actually cautions investors to discard stock holdings in May and return to the market in November, so that they can stay away from seasonal volatility.

Not that this theory bears fruit every year, but this year it seems to hold well. After all, ETFs’ fund flows point to that trend. In the asset redemption section, equities ETFs across the globe were prevalent. On the other hand, safe haven securities and bond ETFs gained assets. Below we highlight the ETF winners and losers in terms of asset flows during the timeframe of May 1 to May 26 (as per etf.com).

Gold Glitters Surprisingly

A flight to safety following a spike in volatility at the start of 2016 brightened the appeal for the safe-haven asset gold (despite the metal’s not-so-great fundamentals). But the hawkish Fed minutes, released in mid May, hinted at the possibility of a June hike, leading to “the longest slump in more than two months” for gold on a stronger U.S. dollar (read: Gold Rally Fades: Buy ETFs on the Dip or Short?).

Interestingly, despite these downbeat fundamentals, gold bullion ETF SPDR Gold Shares (NYSE:GLD) (GLD) added the highest assets worth about $2.66 billion in May. Probably, China’s decision to “buy its second gold storage vault in London” in May was behind this asset surge.

Bond ETFs Garner Attention

Be it aggregate bonds, corporate bonds or TIPS bonds, fixed income products ruled the market in May. The lure for regular current income along with relative safety made this segment a winner.

iShares Core U.S. Aggregate Bond ETF (AGG) hauled in $952.5 million, while Vanguard Intermediate-Term Corporate Bond Index Fund (VCIT) gathered about $664.4 million in assets. Due to the improved outlook on inflation, TIPS ETF iShares TIPS Bond ETF (TIP) collected $665.4 million in assets (read: Time for Investment Grade Corporate Bond ETFs?).

Value ETFs Got Noticed

As the possibility of a sooner-than-expected Fed hike surged, the odds of an upheaval in the market also crept up and investors prepared to position accordingly. Probably thanks to these slightly defensive sentiments, Vanguard Value Index Fund (VTV) reaped about $789.9 million in assets (read: 5 Mid Cap Value ETFs Are Top Picks Now--Here is Why).

Emerging Markets − Expected Loser
Fed rate hike bets took some air out of emerging market investing on the possibility of gradual ceases in cheap dollar inflows. Emerging market equity ETF iShares MSCI Emerging Markets (EEM) shed about $3.12 billion.

U.S. Also a Laggard

The U.S market also looked unsteady with the Fed hike talks. This hit big U.S. equities ETFs like SPDR S&P 500 ETF (NYSE:SPY) Trust (SPY), PowerShares QQQ Trust (QQQ) and SPDR Dow Jones Industrial Average ETF Trust (DIA), which lost about $3.12 billion, $1.49 billion and $797.4 million, respectively.