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August ETF Asset Report

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Following an outstanding July, August has been moderate for U.S. equities. Still-low Treasury yields despite an improving U.S. economy seem to have dominated investor sentiment. However, strengthening Fed rate hike bets has left a last-minute impact on the ETF monthly asset report and could prove to be game changers in the days ahead.

Let’s find out the top gainers and losers in terms of asset growth in August (as of August 29, 2016) (source: etf.com).  

Emerging Markets Earns Attention

The emerging markets (EM) equities have been at the helm in August with the ultra-popular emerging market ETF iShares MSCI Emerging Markets ETF (EEM - Free Report) taking the top spot. EEM has attracted about $2.19 billion in assets in August while iShares Core MSCI Emerging Markets ETF (IEMG - Free Report) has garnered over $1.15 billion in assets in the month (as of August 29, 2016), taking the fifth spot. Yet another EM ETF Vanguard FTSE Emerging Markets ETF (VWO - Free Report) has pulled in close to $1.15 billion in assets in the month.

Better growth prospects, signs of stabilization in China, comparatively higher yield and more resilience to the Fed rate hike bets than what we saw in 2013 has made this segment a winner.

Tech-Laden Nasdaq: A Bright Spot

Tech-heavy Nasdaq-100-based ETF PowerShares QQQ Trust ((QQQ - Free Report) has gathered about $1.61 billion in assets in August. A slew of positive earnings releases and the return of risk-on sentiments to the market (after the Brexit induced sell-off) on a flurry of upbeat U.S. economic data favored this growth-oriented fund. The fund has about 57% exposure to the IT sector (read: Time to Buy These Tech ETFs?).

Corporate Bond ETFs in Favor

Since yields on the 10-year U.S. Treasury bonds remained at very low levels, the lure for higher-yielding corporate bond ETFs returned. Thus, iShares iBoxx $ Investment Grade Corporate Bond (LQD - Free Report) has attracted about $1.23 billion in net assets in the month.

Also, the aggregate bond ETF iShares Core U.S. Aggregate Bond (AGG) has accumulated about $933.0 million in assets. Notably, AGG puts about 38% of its assets in U.S. Treasuries while corporate bonds also grab a major share of it. Its credit quality is high with about 71% bonds being AAA-rated.

Industrial Sector is Back

Industrial Select Sector SPDR Fund (XLI - Free Report) has added about $767.6 million in assets in August as the sector is on a recovery mode. Impressive data for new orders for U.S. manufactured capital goods lately boosted investor sentiment (read: Time to Play These Industrial ETFs?).

Preferred Stock ETF: Another Winner

As bets over a sooner-than-expected rate hike strengthened at the end of the month, investors rushed to high-yielding preferred stock equities ETFs like iShares U.S. Preferred Stock ETF PFF. The fund has amassed about $753.7 million in assets in August (read: ETF Winners & Losers Post Jackson Hole Meet).

SPY: A Surprise Loser

SPDR S&P 500 ETF (SPY - Free Report) has lost about $1.25 billion in assets in the month. Investors probably have shown more interest in Vanguard S&P 500 Index Fund (VOO - Free Report) which gathered about $1.59 billion in the month till August 29, 2016. Investors should note that VOO charges about 5 bps in fees while SPY charges about 9 bps (net expense ratio). A lower expense ratio could be an advantage of VOO over SPY as both products have the same theme.

Hedged Japan: A Spoiler

WisdomTree Japan Hedged Equity Fund (DXJ - Free Report) shed about $1.08 billion in assets as Japan’s economy grew less than expected in Q2.  A stronger yen was also a dampener.

Europe Peters Out

WisdomTree Europe Hedged Equity Fund HEDJ, iShares MSCI Eurozone ETF (EZU - Free Report) and Deutsche X-trackers MSCI Europe Hedged Equity ETF DBEU shed about $551.4 million, $543.7 million and $396.7 million in assets. Slower growth was probably an overhang for this region.

Low Volatility ETFs Fizzle

Two low volatility ETFs, namelyiShares Edge MSCI Min Volatility USA ETF (USMV - Free Report) and PowerShares S&P 500 High Dividend Low Volatility Portfolio (SPHD - Free Report) have shed about $412.1 million and $386.2 million in assets in August. Since the broader markets are relatively steady since the start of Q3, low volatility ETFs have lagged slightly.

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