Thursday, May 5, 2016
ETF flows and asset class bets
ETF flows provide valuable information on where investors are making their bets. These flow numbers are more important than volume traded because it focuses on the net dollar change into an asset class. This money has to be put to work through buying the underlying investments usually represented by an index. These absolute flows are important, but the percentage change tells us the true net impact of money into these asset classes.
The inflows into investment grade bonds but below A and high yield were very significant after the equity decline earlier in the year. The reach for yield was back in force albeit the last week as seen a net outflow from the high yield sector. As important as the yield search has been the flow into commodities, but this flow has not been focused on oil funds as much as precious metals. The march to lower negative yields has renewed interest in gold.