A Mild March
Michael Cafiero – Vice President ETF Trading – Knight Capital Americas, L.P.
Knight ETF Trading: In the last few weeks we have continued to see overall tepid volume as the markets continue to move further positive. Looking back at the first quarter of 2012, the DJIA grew 8.14%, the S&P 500 Index was up 12%, and the Nasdaq Composite led all with a rise of 18.67%. All good news however it has made things a little more difficult for those who find themselves to be tactical or for those long only managers who are looking for an entry point.
Flows: For the month of March Knight led all ETF Securities Brokers with an advertised trade volume of 16.58% while trading in 1445 unique ETFs. (Autex Block Data 4/2/12)
US Equity ETFs: Overall positive inflows were seen over the last three weeks in SPY (SPDR S&P 500 ETF Trust), IVV (iShares S&P 500 Index Fund), and VTI (Vanguard US Total Stock Market). Both growth and value have been in favor with flows into IWD (iShares Russell 1000 Value) and even heavier buy side buying of IWF (iShares Russell 1000 Growth). Flows in mid cap funds, IJH(iShares S&P Midcap 400) and small cap, IJR(iShares S&P Small Cap 600) have also been quite strong. Overall the broad indices have seen mild flows as the market has risen, perhaps many are starting to increase their conviction into specific market capitalizations as many are expecting the overall market to keeps its course as we start Q2.
Fixed Income ETFs: Mixed flows in aggregate bond funds including two sided flows in AGG (iShares Barclays Aggregate) and overall flows from the buy side in BND (Vanguard Total Bond Market) and TRXT (Pimco Total Return ETF). The high yield trade continues with buying seen in HYG (iShares IBOXX H/Y Corp), JNK (SPDR Barclays Capital High), HYLD (Peritus High Yield ETF) and the new SJNK (SPDR Short-Term High Yield). Investment grade as well has seen its share of inflows with LQD (iShares IBOXX Inv Grade Corp) and VCIT (Vanguard Int-Term Corporate). For treasuries we are seeing selling across the board including, SHY (iShares Barclays 1-3 Year TR) and TLT (iShares Barclays 20+ Year TR). Mortgaged Backed has seen positive inflows into MBB (iShares Barclays MBS Bond FD) and for Municipals we have seen some selling in MUB (iShares S&P NAT AMT-Free MUN).
International ETFs: Mixed flows in emerging markets continue to be seen in VWO (Vanguard MSCI Emerging Market) and EEM (iShares MSCI Emerging Market Index). There have been some inflows from the buy side into DEM (Wisdomtree Emg Mkts EQ Income). For broad based we have seen buying in ACWI(iShares MSCI ACWI Index Fund), selling in EFA (iShares MSCI EAFE Index Fund) and well as BKF (iShares MSCI Bric Index Fund). For individual countries we are seeing buying in; EWG (iShares MSCI Germany), EWC (iShares MSCI Canada), EWQ (iShares MSCI France Index Fund), and EWW (iShares MSCI Mexico Investable). Selling has been seen in; EWZ (iShares MSCI Brazil), and EWY (iShares MSCI South Korea Index).
Currency and Commodity ETFs/ETNs: Mixed Euro currency flows of FXE (Currencyshares Euro Trust), with some selling in FXA (Currecnyshares Australian Dollar) and FXY (Currecnyshares Japanese Yen). There has been some selling to note in Gold as seen in GLD (SPDR Gold Trust) and well as in Silver with SLV (iShares Silver Trust). Selling has been seen in KOL (Market Vectors Coal ETF), JJC (iPath DJ_UBS Copper Sub Index), and PPLT (ETFS Platinum Trust). SLX (Market Vectors Steel Index Fund), and NLR (Market Vectors Uranium & Nuclear) saw their share of inflows.
Sector ETFs: Regarding sector flows in the last several weeks we have seen buying in; XLY(Consumer Discretionary Select), XLP (Consumer Staples SPDR), XLK(Technology Select Sector), and XLF (Financial Select Sector SPDR). While selling was seen in XLE(Energy Select Sector SPDR), IXC (iShares S&P Glbl Energy Sector), and IYM (iShares DJ US Basic Materials).
Alternative/Specialty ETFs: The volume of volatility linked ETFs are always relatively high, however they have spiked even higher in the last several weeks seeing mixed flows of VXX(iPath S&P 500 VIX S/T FU ETN) and outflows of TVIX (Velocityshares 2X Vix Sh-Trm). Dividend oriented ETFs are continuing to see inflows highlighted by VIG(Vanguard Dividend Appreciation ETF), DVY (iShares DJ Select Dividend), and IDV(iShares DJ Intl Select Div). Demand for REIT exposure was apparent from the buy side seen in flows of IYR (iShares DJ US Real Estate), RWO (SPDR DJ Global Real Estate E), and VNQI (Vanguard Glbl Ex-US Real).
You may reach Michael directly at mcafiero@knight.com
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