Second-Quarter Off to an Eventful Start
While the market averages may suggest a quiet start to the second quarter, in reality it was anything but geopolitical tensions (to put it mildly) between Russia and Ukraine had markets on edge, the U.S. housing market showed signs of weakness that could potentially stall the economic recovery, and the Federal Reserve reiterated that it would be willing to maintain near-zero rates for longer than originally anticipated. Despite all this, April was a strong month in terms of ETF asset flows, as about $22 billion in net asset flows poured in.
International Equity ETFs led all of the broad category groups with $8.3 billion in net inflows in April, thanks to strong interest in developing markets. Emerging market equity ETFs reversed course, posting positive net asset flows for the first time this year, attracting nearly $5 billion across the category in April. In fact, iShares MSCI Emerging Markets (EEM) attracted more than $4 billion in net inflows by itself, taking the crown for the largest monthly inflow. Vanguard FTSE Emerging Markets (VWO), the largest fund in the category, had a decent haul of about $650 million in net new assets. Still, over the trailing one-year period, EEM and VWO have shed roughly $6.5 and $10.6 billion in net assets. After topping the charts in March, U.S. Equity ETFs had another solid month in April, in terms of asset flows. There was plenty of love to go around for ETFs tracking the S&P 500 Index. SPDR S&P 500 (SPY), iShares Core S&P 500 (IVV), and Vanguard S&P 500 ETF (VOO) attracted net flows of $2.3 billion, $2.1 billion, and $1.3 billion last month, respectively. Even Guggenheim S&P 500 Equal Weight (RSP) got in there with more than $200 million in net inflows.
It was another relatively quiet month on the new launch front in April. Two frontier market countries, UAE and Qatar, have graduated to having their own single-country ETFs under the iShares banner. Frontier markets have been catching interest lately as investors hunt for non-correlated assets and untapped growth potential; ETFs tracking frontier market strategies took in about $500 million in net new assets in April. For those not sold on the prospects of UAE and Qatar, the new pair of ETFs can be used to short out the exposure to these Gulf Arab states from broad based frontier market indexes. UAE and Qatar each make up nearly 20% of the MSCI Frontier 100 Index and may court geopolitical risks that many investors are not comfortable with.
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