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Last Week Saw 1st ETF Outflow in 2020: Winners & Losers

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Last week was the most terrible one for Wall Street since October 2008. It witnessed Dow Jones’ worst single-day slump and the S&P 500’s fastest correction in history. No wonder, "the first stock market correction of 2020 led to the first weekly net outflow from ETFs this year", per etf.com. Investors pulled out about $21.1 billion from U.S.-listed ETFs during the week ending Thursday, Feb 27, according to etf.com.

The outflows were more pronounced in the equity segment, with investors withdrawing about $17.1 billion in assets out of U.S. equity ETFs while about $3.6 billion was wiped out of international equity ETFs. U.S. fixed income ETFs saw net outflows of $292 million during the week.

Against this backdrop, we highlight a few ETFs that saw a surge/decline in assets by the maximum measure last week. The data are as per etf.com.

Winners

iShares 7-10 Year Treasury Bond ETF (IEF - Free Report) – Up $1,317.7 million

Heightened fear of coronavirus initiated a safe-haven rally, dragging down the benchmark U.S. treasury yield to a record low of 1.13% on Feb 28. This, in turn, brightened the appeal for U.S. treasury bond ETFs (read: Treasury ETFs Hit New Highs as Coronavirus Fears Spread).

The underlying ICE U.S. Treasury 7-10 Year Bond Index measures the performance of public obligations of the U.S. Treasury that has a remaining maturity of greater than seven years and less than or equal to 10 years. Weighted Average Maturity and the effective duration of the fund are 8.53 years and 7.68 years, respectively. It charges 15 bps in fees. AUM increased 6.91% in a week.

Vanguard S&P 500 ETF (VOO - Free Report) – Up $1,215.47 million

The fund follows the S&P 500 index. U.S. markets may be tanking now on virus threat but investors faith from the market has not wiped out. After all, the latest U.S. economic data points have come in healthy. The U.S. economy is one of the best-positioned in the developed market world. A dovish Fed is another tailwind. Many investors are may be using the latest slump as an entry point (read: "At Least 3 Rate Cuts" by December? Sector ETFs to Play).

As a result, the fund saw huge weekly inflows last week. Investors should also note that by picking products like VOO and Vanguard Total Stock Market ETF (VTI - Free Report) , they are putting money into the lowest-cost products.

Losers

SPDR S&P 500 ETF Trust SPY – Down $18,723.3 million

The fund charges 9 bps in fees instead of 3 bps charged by VOO. This is probably pushing investors away from this high-cost S&P 500 fund. A low expense ratio is always tempting. Consider an expense ratio of 1%, a fund of $10,000 invested at 8% annual return will grow to $19,672 in 10 years, while the same fund invested at an expense ratio of 0.1% will grow by a higher amount of $21,390. The difference between the returns will keep zooming out, if the holding period expands (read: 5 Low-Cost Tech ETFs for Investors).

iShares iBoxx USD High Yield Corporate Bond ETF (HYG - Free Report) – Down $3,583.53 million

Investors steered clear of junk bond ETFs like HYG and SPDR Bloomberg Barclays High Yield Bond ETF (JNK - Free Report) (assets down by $1,174.53 million), heading for high-investment grade products. This is because if the global economic growth slows down materially, we might end up seeing some terrible corporate earnings reports and defaults. So, investors preferred to stick to the investment-grade ones as there were solid capital gains (amid safe-haven rally) as well as lesser chances of default.

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