Displaying items by tag: ETFs

With bond mutual funds experiencing record losses this year, many investors are headed for the exit. But most are not leaving fixed income altogether, they’re just swapping mutual funds for ETFs. The main reason is taxes. Many investors are selling positions in bond funds and putting the cash into similar ETFs to harvest tax losses. According to The Wall Street Journal, “This year is shaping up to be the biggest 'wrapper swap' on record.” About $454 billion has been pulled from bond mutual funds, while $157 billion has flowed into bond ETFs through the end of October. According to macro research firm Strategas, it would be the largest net annual swap to ETFs by a wide margin.” Todd Sohn, ETF strategist at Strategas stated, “The Fed is at its most aggressive in 40 years. Along with inflation, that has absolutely crushed bonds. It’s set off the acceleration of wrapper swapping that we have seen in equities for a while. Now we’re finally getting it in bonds.” Many of these swappers are also taking their money out of mutual funds that hold riskier bonds and putting them into safer Treasury ETFs.

Finsum:With the bond market experiencing its worst year since 1975, bond investors are trading mutual funds for ETFs at a record pace.

You go, ETFs. More and more, they’re a key component in the evolving fixed income terrain, according to insuranceaum.com. That tidbit surfaced in a survey of 700 institutional investors and investment decision makers.

The download on ETFs: 

• Being leveraged for portfolio construction – and that includes non-core allocations
• Playing a liquidity role as investors step up allocations to non-liquid sources of income
• Helping to facilitate the internalization of fixed income management
• Enabling investors to implement, with precision, ESG objectives

Meantime, the New York Stock Exchange’s not only about the peaks and valleys of the market.

And, hey, who doesn’t need a respite from that maddening merry go round?

Assets under management in fixed income ETFs swelled from $574 billion in 2017 to $1.28 trillion last year, according to data recorded by the exchange, reported ssga.com. Wait, there’s more: during the same timeframe, the number of funds leaped from 278 to almost 500.

Jump starting the juices on current income is the primary intent of ETF’s, according to entrepreneur.com. The story appeared originally in Stock News. Capital appreciation’s a secondary objective. The fund’s hopping, too, with $4.78 billion in assets under management, not to mention 1307 holdings.

ESG seems to be getting battered by all sides. Not only do ESG funds have to deal with regulators bearing down on their messaging and politicians questioning their purpose, but performance has also been an issue, especially this year. According to a new Bloomberg article, the 10 largest ESG funds by assets have all posted double-digit losses, with eight of them underperforming the S&P 500. This includes the iShares ESG Aware MSCI USA ETF (ESGU) which has $20.7 billion in assets and the Vanguard ESG US Stock ETF (ESGV) which currently has $5.9 billion in AUM. The worst performer so far has been the Brown Advisory Sustainable Growth fund (BAFWX) which was down 28.1% year to date as of Dec 5th. Poor performance in BAFWX can be attributed to a chunk of the portfolio being in software, semiconductor, and internet stocks, which have been hit hard this year due to rising interest rates, inflationary concerns, and the possibility of a recession. However, despite the bad performance, money continues to flow into ESG funds. A recent study by Harvard Business School professors found that investors are willing to accept lower returns in exchange for the societal benefits of ESG.

Finsum:Despite underperforming the S&P 500, large ESG funds continue to see inflow as investors are willing to accept lower returns in exchange for the benefits ESG provides society.

StockSnips, a firm that provides easy access to stock market news sentiment analysis, announced that it has introduced a new SPDR Sector ETF-based portfolio model that ranks sectors by leveraging its proprietary sector sentiment signal. This will be the fifth StockSnips model portfolio that aims to deliver alpha after the launch of equity-based portfolios last year. With model portfolios increasingly attracting assets and markets being impacted by social media, investor sentiment, and chatter, StockSnips believes its signal can quantify those investor sentiment trends, resulting in alpha for end investors. While most sentiment analysis uses a survey methodology, StockSnips separates signals from the noise through Micro-sentiment, focused at the individual firm level. Ravi Koka, CEO of StockSnips commented on the model, "We are excited to bring a sector ETF-based portfolio model to investment advisors and asset managers, leveraging our extensive research in transforming unstructured textual information to a valid signal, and a robust proxy for measuring investor sentiment for a sector.” Their ticker-based portfolio models have performed well so far in a volatile 2022, and they believe the back-testing results for their sector model bode well for investors as well.

Finsum:StockSnips introduced its fifth model portfolio that aims to achieve alpha through its proprietary sector sentiment signal.

According to Bloomberg data, the iShares iBoxx $Investment Grade Corporate Bond ETF (LQD) saw $3 billion in outflows on Monday, its largest one-day outflow since the fund’s inception twenty years ago. The exodus was quite the reversal for LCD as the ETF saw six straight weeks of inflows. The fund was up 9% between October 20th and Friday, with investors pouring money back into credit with the hope that the Fed might slow down the pace of rate hikes. However, those hopes fell as St Louis Fed President James Bullard warned that “markets are underpricing the risk that the central bank will have to be more aggressive rather than less aggressive.” In response, LQD dropped 0.7% on Monday, its worst performance in over a month. As of Monday’s close, the ETF was down 19% for the year, its biggest loss ever. Peter Chatwell, head of global macro strategies trading at Mizuho International told Business Insider that “The fund’s recent rebound likely exacerbated the withdrawals as year-end approaches. Clearly, at this time of year, some money gets taken out of the market, particularly if performance has recently been strong, which with LQD it has.”

Finsum:LQD saw its largest one-day outflow ever as St Louis Fed President James Bullard warned that the Fed will need to become more aggressive, not less aggressive.