The exchange-traded funds universe could be about to do something in 2018 that it has seldom done before: shrink.
Amid a lengthy period of market turmoil — particularly in equities, where the U.S. has been rangebound for months and international stocks have been struggling — investors have once again pulled money from the investment vehicles, resulting in rare pauses in growth for an industry that has otherwise been surging in size by leaps and bounds for years.
ETFs saw outflows of $679 million in June, according to State Street Global Advisors, one of the primary sponsors for ETFs. June represented the third month of negative flows so far this year, following back-to-back outflows in February and March.
“This is the greatest number of months with outflows for a year since 2008, and we are only halfway through 2018,” wrote Matthew Bartolini, head of SPDR Americas Research at State Street Global Advisors. “One more month of net outflows and 2018 would tie the record of four reached a few times in the late 90s.”
The June outflows deserve some context. For one thing, monthly redemptions of less than $1 billion represent a drop in the overall bucket, as there are about $4.86 trillion in global ETF assets, according to research firm ETFGI. Furthermore, year-to-date flows remain positive, with more than $124 billion flowing into ETFs over 2018 thus far, including June.
Finally, not every fund category saw an investor retreat last month. Fixed-income ETFs had inflows of nearly $7.5 billion last month; however, this was offset by the $5.86 billion pulled from stock funds (led by international funds, a category with $9.9 billion in outflows), and the $2.1 billion withdrawn from commodity-based products.
“The challenging market environment has clearly constricted momentum and weighed on sentiment. In February and March it was