Market Overview

Inflows to These ETFs Are Telling

Alright, so what follows is data pertaining to just a couple of ETFs from just one issuer, Invesco's (NYSE: IVZ) PowerShares unit.

While it can be argued that what is going on with one ETF issuer is not happening with another, it also must be noted PowerShares is no small shop.

This is the fourth-largest U.S. ETF sponsor with nearly $77 billion in assets under management. That is more than PIMCO and Charles Schwab (NYSE: SCHW) combined, and multiplied by three.

More importantly, recent inflow data from PowerShares paints an accurate picture of the current investing environment. Inflows to two of the most prominent PowerShares ETFs – the PowerShares Senior Loan Portfolio (NYSE: BKLN) and the PowerShares S&P 500 Low Volatility Portfolio (NYSE: SPLV) – highlight at least two things.

First, investors continue to embrace low volatility equity fare, something that has been made obvious by the returns of various domestic sector ETFs. Second, the death of high-yield bonds has again been greatly exaggerated. BKLN indicates as much.

BKLN, the dominant senior loan ETF, has raked in $1.45 billion in new assets this year, according to PowerShares data. That is impressive under any circumstance, but more so when considering many an obituary has been written on junk bond ETFs this year.

BKLN, now home to $2.96 billion in assets, allocates a combined 84 percent of its weight to bonds rated either BB or B by Standard & Poor's.

SPLV, the largest low volatility ETF, has not been a slouch when it comes to attracting assets in 2013. That ETF attracted nearly $750 in inflows as of March 25, according to PowerShares. The fund, which was up 7.75 percent year-to-date at the start of trading today, now has almost $4.2 billion in assets under management.

SPLV and BKLN have 30-day SEC yields of 2.94 percent and 3.86 percent, but PowerShares data pertaining to other funds further underscore the notion that low interest rates are driving investors to ETFs offering decent yields.

For example, the PowerShares Preferred Portfolio (NYSE: PGX) ranks fourth among PowerShares in terms of year-to-date inflows at almost $275 million. PGX has a 30-day SEC yield of almost 6.4 percent. The PowerShares Financial Preferred Portfolio (NYSE: PGF) ranks tenth among the firm's ETFs with 2013 inflows of about $106.5 million. PGF's 30-day SEC yield is 6.43 percent.

In further anecdotal evidence that low volatility and dividends are sources of allure for investors, three of the five most searched ETFs on the PowerShares web site last week were BKLN, SPLV and the PowerShares S&P 500 High Dividend Portfolio (NYSE: SPHD), according to the firm's Twitter feed.

SPHD tracks a fitting index for the current environment, that being the S&P 500 Low Volatility High Dividend Index. The ETF, which debuted in October, has a 30-day SEC yield of 3.79 percent and $83.1 million in assets.

For more on ETFs, click here.

Posted-In: Long Ideas News Bonds Broad U.S. Equity ETFs Short Ideas Dividends Dividends Specialty ETFs Best of Benzinga

 

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