Exchange-traded funds have surged in popularity in 2015, but it's not U.S. equities that are leading the charge.
Investors poured $97.2 billion into various ETFs and other similar products in the first quarter, marking the $2.9 trillion industry's biggest start ever despite a wobbly U.S. stock market and a testy geopolitical climate, according to data from BlackRock, the world's largest provider of such funds. (U.S.-based ETFs have about $2.1 trillion in assets.)
There essentially have been three major investment themes this year, and players in the exchange-traded market have made each work: A quest for investment themes outside the U.S.; the offshoot of that, which has seen domestic attention turn away from large caps and toward mid- and small-sized companies, and capitalizing on the big moves in currency markets, particularly an appreciation of the U.S. dollar and the decline of its global competitors. The greenback has gained 7 percent so far against a trade-weighted basket of other leading currencies.
Some $59 billion has found its way into products that focus on currency hedging, according to ETF.com, which said the group represented four or the top 10 funds for investor flows during the first three months of the year.
Other big developments in March saw investors clamoring for developed international markets, with $14.8 billion flowing to European funds and $8.3 billion to Japanese equities. U.S.-focused funds trailed, with $6.2 billion in inflows, according to BlackRock.
In total, the month saw $32.6 billion go to non-U.S. developed markets, a total that matched the previous two months combined and was especially remarkable considering that 2014 closed with a huge run toward U.S. equities. The fourth quarter saw total inflows to all exchange-traded products at a record $138 billion, with the largest focus toward domestic large-cap.