Fund Flows – Allocators vs. Traders

While we normally focus on the combined flows of ETFs and mutual funds each month, the first half of this update will focus solely on equity ETF flows.

A 2019 Bloomberg op-ed took exception to the idea that equity ETF flows, taken as a whole, offer a good view of retail investor sentiment. In fact, the op-ed argued equity ETF flows can be broken into two groups – ‘allocator’ ETFs and ‘trader’ ETFs. Below is an update of the flows into each type of fund.

Allocator ETFs are used by investors who simply want to buy stocks for the long term. They are less concerned with liquidity and more concerned with cost. Additionally, they are often led by their advisors into certain funds. This list consists mostly of low-cost ETFs run by Schwab, Vanguard, and iShares, but the complete list can be seen on a Bloomberg terminal at BI ETFSG <Go> and selecting ‘Fund Flows’ and ‘Proprietary’.

With data on this subset starting in August 2017, the chart below shows this group is not too susceptible to short-term swings in the market. They put the money in a fund and rarely pull it out.

Traders, on the other hand, are more concerned with liquidity, so this group of ETFs consists of bigger funds such as SPY and QQQ. Their weekly flows, shown below, include both inflows and outflows regularly.

Cumulatively, since mid-2017, allocator ETFs have seen $1 trillion in inflows. Over the same period, trader ETFs have seen just $143 billion in inflows despite being invested in similar assets.

At the end of the day, these groups offer a similar breakdown to that of the active and passive ETFs we highlight regularly. It is worth keeping these groups in mind, however, any time a more specific breakdown of ETF flows is desired.

General Overview:

The table below shows the combined flows and assets of the major mutual funds and ETFs categories.

The chart below shows the combined flows and assets of all long-term mutual funds and ETFs.

Long-term funds can be divided into equity funds, bond funds, and hybrid funds. Each is shown below.