Market Overview

More Than The Core: Some Focused ETFs Gather Big Cash

More Than The Core: Some Focused ETFs Gather Big Cash

Most of the time, exchange traded funds adding the most assets qualify as plain vanilla funds, or those funds that can be used as “core” holdings. Think traditional S&P 500 tracking funds or products like the Vanguard Total Market ETF (NYSE: VTI) and the iShares Core MSCI EAFE ETF (CBOE:IEFA).

“More than a third of the way through 2018, investors have poured $93 billion into ETFs,” said CFRA Research Director of ETF & Mutual Fund Research Todd Rosenbluth in a Monday note. “Many of the well-known and well-diversified core products have swelled even larger, as advisors and investors use ETFs to build asset allocation portfolios. However, some factor-driven and sector-focused funds have broken through the league leader board.”

What Happened

While plain vanilla funds remain the bread and butter of ETF asset gathering, some more focused and refined funds are adding assets at an impressive rate this year. As Rosenbluth points out, the iShares Edge MSCI USA Momentum Factor ETF (CBOE: MTUM) and the Global X Robotics ETF (NASDAQ: BOTZ) are among the 33 ETFs that have year-to-date inflows of $1 billion or more.

“MTUM holds stocks exhibiting relatively high price momentum,” said Rosenbluth. “It's essentially a 'let your winners run' approach based on academic research.”

MTUM, now home to $8.2 billion in assets under management, allocates 56.67 percent of its combined weight to technology and consumer discretionary stocks. Microsoft Corporation (NASDAQ: MSFT) and, Inc. (NASDAQ: AMZN) combine for over 10 percent of the fund's weight.

Why It's Important

Investors' appetite for funds such as MTUM and more nuanced fare such as BOTZ could be a sign risk appetite remains sturdy.

“BOTZ is a more narrowly focused thematic ETF focused on companies working on the developed and production of robotics and artificial intelligence,” said Rosenbluth.

The ETF is not yet three years old and already has $2.57 billion in assets under management, making it one of the largest Global X funds. BOTZ jumped 58 percent last year, which could be a factor in its asset-gathering proficiency in 2018.

What's Next

Both MTUM and BOTZ could be propelled higher if the technology sector jumps. Conversely, if investors move out of growth and momentum stocks in favor of value fare, theses ETF could be vulnerable.

CFRA rates MTUM at Overweight and BOTZ at Market Weight.

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