Millennials Like These ETFs
As has been widely documented, exchange-traded funds are on a torrid pace of asset gathering this year. Through the first seven months of 2017, U.S.-listed ETFs added $191 billion in new assets, easily positioning the asset class to topple the inflows record set in 2016.
And as has been previously documented, millennials are big drivers of ETF growth. Data suggest the same of baby boomers and the oft-overlooked Generation X (Gen X). Recent data from brokerage giant TD Ameritrade (NASDAQ:AMTD) suggest millennial investors have been flocking to industrial ETFs and fixed income funds.
While millennials' support of President Donald Trump was mixed in the 2016 presidential election, younger investors are taking advantage of one the quintessential Trump trades, that being aerospace and defense stocks, with industrial ETFs. For example, the Industrial Select Sector SPDR (NYSE:XLI) and the Vanguard Industrial ETF (NYSE:VIS) are up 11.4 percent and 9.3 percent, respectively, year to date. XLI has added $654 million in new assets this year while VIS has seen inflow of $238.2 million.
They Like Bond ETFs, Too
Although the Federal Reserve has boosted interest rates twice this year with plans for another rate hike before year-end, bond ETFs will likely shatter previous asset-gathering records as well. Led by the iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSE:LQD), three of this year's top 10 asset-gathering ETFs are bond funds.
Among millennials, “cumulative net flows of Taxable Bond ETF are up 39 percent as a percentage of AUM from January,” according to TD Ameritrade.
In July, municipal bond ETFs were favored by millennial investors. That is an interesting phenomenon considering that municipal bonds are perhaps too conservative of an asset class for younger investors with long time horizons. It could also be sign that the global financial crisis, which started a decade ago, is still fresh in the minds of millennials' many of whom started investing and working during or soon after the crisis.
Moving Away From International ETFs
International equity ETFs, including both developed and emerging markets funds, have been among the best-performing equity funds this year. In many cases, ex-U.S. international equity ETFs are trouncing the S&P 500, but some investors are taking profits in those funds.
Last month, both Gen X and millennial investors trimmed their exposure to international equity ETFs, according to TD Ameritrade.
Still, four of the top 10 asset-gathering ETFs since the start of the third quarter are international equity funds. Year to date, half of the top 10 asset gatherers are ex-U.S. equity ETFs.
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