Money Flows Out of US Stock ETFs...But to Where?

Investors in exchange-traded funds exited U.S. stocks in droves last month, pulling out $10.7 billion in assets. Their preferred alternative: emerging markets.

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Man pouring money on himself

The U.S. stock ETF feeling the most pain in August was SPDR S&P 500. In August, $6.6 billion in assets flowed out of the fund, for a year-to-date outflow of $19.1 billion, according to monthly data from Morningstar, the Chicago fund-tracking firm.

SPDR S&P 500 is designed to follow the price and yield performance of the S&P 500 Index, which has been trading within a narrow range since mid-May.

For the year-to-date, U.S. stock ETFs lost a net $12.8 billion. Money has flowed instead into ETFs that invest in fixed-income, commodities and emerging markets, Morningstar said.

Investors have been diving into emerging market ETFs with enthusiasm for the last three years, but the momentum is increasing. Over the last three years, 61 percent of all flows into international-stock ETFs were into emerging market funds. In August, that percentage increased to more than 95 percent: of the $4.4 billion that flowed into the international fund sector in August, $4.2 billion went to emerging market ETFs.

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