Investors raced into US stock exchange-traded funds during the latest week, restoring at least briefly a key pillar of support for markets, data from the Investment Company Institute showed on Wednesday. US-based equity ETFs collected $11.2 billion during the week through May 16, according to the ICI trade group, the most since mid-March's high-water mark for the year in terms of demand.
The week included gains in small-capitalization US stocks - seen as more sheltered than large companies from global concerns, including the US-China trade conflict - and a rally in healthcare stocks following a speech on drug prices by US President Donald Trump that was less aggressive than some investors feared. Along with share-buying by companies themselves, strong demand for ETFs has been a primary support for US equities in their near-decade gallop higher, Goldman Sachs Group Inc research shows.
This year, however, that demand has waned. The average US equity ETF inflow this year is just over $3 billion per week, down from $6.7 billion per week throughout 2017, based on the ICI data. "The last few months we've seen a slowdown in the ETF growth. But let's be clear, I think year-to-date we're over $50 billion in net inflows, so it is still at a very fast pace," BlackRock Inc Chief Executive Larry Fink said at the company's annual shareholders' meeting on Wednesday. BlackRock manages the largest ETF lineup, both by assets and number of funds.
Fink added that some investors are using the funds to access bonds and regions beyond the United States. Equity mutual funds recorded withdrawals of $2.8 billion during the week, according to the ICI. Including both mutual funds and ETFs, total stock fund sales were $8.4 billion, while bond funds took in $5.2 billion, the trade group said.