dChan
Anonymous ID: 501dad Nov. 1, 2018, 12:50 p.m. No.3688881   🗄️.is đź”—kun

All about the flow of money anons

Think turning around an aircraft carrier on a dime, although I've seen then do some pretty crazy shit for size. Nevertheless big money has to turn around too. They don't do it as easy as /ourboys

 

https://www.zerohedge.com/news/2018-11-01/october-was-wake-call-follow-etf-flows

ex

How much are exchange traded funds to blame for October’s US equity market volatility, and what can capital flows here tell us about current investment trends? As the old supermarket tabloid tagline went, “Enquiring minds want to know…”

 

Let’s start with a little myth-busting: contrary to popular opinion, ETFs do not own sizable chunks of headline names like the FAANG stocks. Total ETF ownership of Facebook, Apple, Amazon, Netflix and Google averages just 6.1% of shares outstanding according to data from industry source www.xtf.com. While ETFs are only a portion of total “passive” invested capital, their specific impact on both stock valuations and intraday volatility is arithmetically small.

 

Now, if you want to see where ETFs make more of a difference to US stock prices, dig past the top 1,000 names by market cap and look at the Russell 2000 or the S&P 600. The largest name in the Russell (teen retailer Five Below) is 12.3% owned by ETFs. The largest weighting in the 600 (defense/commercial IT company CACI Intl) is 17.8% owned by ETFs. Now we’re talking about real money…

 

That’s a good segue to a discussion of October ETF money flows, because US equity small cap ETFs saw sizable redemptions this month relative to large caps. The numbers:

 

For October-to-date, ETF investors sold down a net $1.2 billion of small cap US equity products. Over the same period, they actually added $1.1 billion of capital to US large cap ETFs.

 

This reversed the Q1 – Q3 trend of outsized inflows into US small cap ETFs, which averaged +$2.5 billion/month. Those inflows were, until this month, basically equal to the +$2.7 billion/month for US large caps but obviously on a much smaller base of market cap.

 

Key takeaway: if you’ve wondered why US small caps rolled over so hard in October, look no further than ETF money flows. We noted yesterday that US small caps have underperformed the S&P 500 by a 2-standard deviation differential in the last 90 days. We like them here, but their near term action seems to be in the hands of ETF asset allocators.