By Chris Dieterich
NEW YORK--August is poised to see the biggest cash withdrawal
from all U.S. exchange-traded funds in more than three years,
according to preliminary data from BlackRock Inc. (BLK), the
largest U.S. ETF provider.
Some $16.1 billion flowed out of U.S. ETFs in August, through
Thursday. Barring some massive moves Friday, the outflow this month
would be the worst for the U.S. ETF industry since January 2010,
when $17.1 billion came out.
The prime culprit is the ETF market's biggest and most widely
traded fund, the $137 billion SPDR S&P 500 (SPY). The ETF had
shed a whopping $13 billion alone, through Thursday. Big outflows
from stock & bond ETFs overshadowed inflows from international
equity ETFs, which took in $5.6 billion.
Questions about when and if the Federal Reserve will reduce its
stimulus efforts have dominated the past month, with the threat of
U.S. military strikes against Syria fraying nerves earlier this
week. The S&P 500 has closed Thursday down 4.2% since hitting
its all-time high on Aug. 2, and was on pace for its worst monthly
decline since May 2012.
Rising interest rates also shook ETF investors out of bond ETFs,
which were poised to see outflows of $6.8 billion. August's outflow
was setting up to come in shy of the $7.3 billion that poured out
of bond ETFs in June, when Federal Reserve Chairman Ben Bernanke
first said that the central bank could begin to dial back its
monthly bond buying this year.
Mutual fund data show similar caution in stocks. Stock mutual
funds saw their stream of cash slow in August, but still was on
pace to see inflows, according to preliminary data from Lipper.
Some $10.8 billion came into stock mutual funds in August, compared
with an inflow of $22 billion a month earlier.
Bond mutual funds were set to see inflows for the first time
since May, taking in $3.8 billion.
"We don't know what's going to happen in Syria, or with the
Fed," said Reed Choate, portfolio manager of equities and
fixed-income at Neville, Rodie & Shaw in New York, which
oversees $1.3 billion. "We're kind of digesting this week and
seeing what's going to happen, waiting to make moves until we get
more clarity."
Write to Chris Dieterich at
christopher.dieterich@dowjones.com
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