Most Loved ETFs Of The Third Quarter

The third quarter was a solid one for global stock markets with upbeat economic data pointing to financial well-being. It was eventful with Brexit negotiations, the central banks signaling the end of cheap money era, solid earnings reports, intensifying tensions between the United States and North Korea, Hurricane Harvey, Trump’s tax reform talks and the victory of German Chancellor Angela Merkel for the fourth term (read: Top & Flop Zones of Q3 and Their ETFs).

International ETFs Rock

While the Dow Jones logged the eighth consecutive quarter of gains, international investing was the real winner courtesy of cheap valuations and threats of political instability in the United States. The prospect of policy tightening across the globe is in line with the Fed and pushed the U.S. dollar lower and other currencies higher, making international investing tempting.

Notably, United States announced reverse quantitative easing in September while the European Central Bank (ECB) and Bank of England (BoE) are also looking to reduce the level of monetary policy stimulus by the end of the year. Given this, international products have seen solid inflows in the third quarter with iShares Core MSCI EAFE ETF IEFA leading the way, pulling in nearly $6 billion in capital (read: Here's Why International ETFs Continue to Outperform?).

The ETF with an asset base of around $36.8 billion and average daily volume of about 4.4 million shares, offers exposure to a broad range of companies in Europe, Australia Asia, and the Far East by tracking the MSCI EAFE IMI (LON:IMI) Index. It holds 2,525 stocks in its basket and charges 8 bps in annual fees. The fund gained nearly 5% in the third quarter and has a Zacks ETF Rank #2 (Buy) with a Low risk outlook.

Another developed market fund, Vanguard FTSE Developed Markets ETF VEA, accumulated more than $4.3 billion, propelling its AUM to $62.9 billion. This fund tracks the FTSE Developed All Cap ex US Index, holding 3829 stocks. It charges just 7 bps in fees per year and trades in heavy volume of 7.6 million shares on average. It added 4.9% in the quarter and has a Zacks ETF Rank #2 with a Low risk outlook.

Emerging Market ETFs Gain Traction

Investors also favored emerging market funds as these appear cheaper than the developed-market counterparts. The surge in the technology sector and among Chinese giants added to the strength. Notably, the two popular funds, Vanguard FTSE Emerging Markets ETF VWO and iShares Core MSCI Emerging Markets ETF IEMG, gathered nearly $3.1 billion and $2.4 billion, respectively (read: Emerging Markets Leading This Year: 5 Top-Performing ETFs).

Both funds charge 14 bps in annual fees and have a Zacks ETF Rank #3 (Hold) with a Medium risk outlook. However, VWO is more popular with AUM of $62.3 billion and average daily volume of 10.4 million shares while IEMG has $37.4 billion in asset base and trades in volume of 7 million shares per day on average. During the quarter, VWO and IEMG were up 6.8% and 8%, respectively.

Craze for Treasury ETFs Continues

Despite the sell-off in early September and hawkish Fed views, the craze for iShares 20+ Year Treasury Bond ETF (V:TLT) continued as investors sought flight to safety amid volatility and uncertainty. The fund saw inflows of $2.3 billion in the third quarter, propelling the fund’s asset base to $9.3 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 26.03 years and effective duration of 17.57 years. It charges 15 bps in fees per year and shed 0.7% during the quarter. Currently, TLT carries a Zacks ETF Rank #3 with a High risk outlook (read: Defensive ETFs to Tackle Weak Job Data, North Korea Tensions).

S&P 500 ETF Saw Mixed Reactions

The ETFs that track the S&P 500 index saw mixed reactions from investors. This is especially true given that SPDR S&P 500 ETF Trust (AX:SPY) is leading the redemptions list with nearly $3.1 billion in outflows while iShares Core S&P 500 ETF IVV is the top asset creator of the third quarter, having accumulated nearly $6.3 billion.

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

SPDR-SP 500 TR (SPY (NYSE:SPY)): ETF Research Reports

ISHARS-SP500 (IVV): ETF Research Reports

VANGD-FTSE EM (VWO): ETF Research Reports

VANGD-FTSE DV M (VEA): ETF Research Reports

ISHARS-CR MS EA (IEFA): ETF Research Reports

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

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Zacks Investment Research