By James Thorne
NEW YORK (Reuters) – Equity exchange-traded funds, which draw a diverse set of clients including fast-trading hedge funds, attracted $7.54 billion of net new cash in the week ended June 13, according to Investment Company Institute data released on Wednesday.
After the divisive G7 summit in Quebec left stock indexes relatively soft, equity ETF investors got a boost by the “decent” meeting between U.S. President Donald Trump and North Korean leader Kim Jong Un, said Bryan Hinmon, portfolio manager of the Motley Fool Global Opportunities Fund.
“Investors are able to use ETFs for more short-term trading,” Hinmon said. “The worst case scenarios seemed to be off the table,” said Hinmon, referring to the meeting between Trump and Kim.
Equity ETFs had estimated net issuance of $7.54 billion for the week, compared to estimated negative net issuance of $1.06 billion in the previous week. Domestic equity ETFs had estimated net issuance of $8.96 billion for the week ended June 13, ICI added.
All told, equity demand in the ETF space overshadowed net outflows in long-term mutual funds – which are heavily favored by retail investors – of $772 million.
Combined demand for bonds among ETFs and mutual funds strengthened to $5.6 billion, slightly above the average for the year. “I think what you’re seeing is this sort of barbell approach with a rebound in domestic equity flows but also investors fleeing into bonds,” Hinmon said.
Fixed-income investors were not deterred by the U.S. Federal Reserve, which raised interest rates as well as its tightening guidance for 2018 on the final day of the ICI reporting period.
Commodity funds posted a second straight week of outflows in the period ending June 13 at $416 million. Hybrid funds, which hold both stocks and fixed-income securities, were hit with their 12th straight week of withdrawals at $2 billion.
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