Hedge Fund News From HedgeCo.Net

Growth ETFs Redeem $5.6 Billion since Start of April, while Value ETFs Issue $3.9 Billion

TrimTabs Investment Research reported today that there has been a massive rotation out of growth and into value this spring. Growth-oriented U.S. equity exchange-traded funds have redeemed $5.6 billion (4.6% of assets) since the start of April, while value-oriented U.S. equity ETFs have issued $3.9 billion (2.6% of assets).
“Fund flows have shifted dramatically beneath the market’s calm surface,” said David Santschi, Chief Executive Officer of TrimTabs. “While most major U.S. stock market averages were little changed in recent weeks, investors showed an overwhelming preference for value over growth.”
In a research note, TrimTabs explained that the shift in flows has occurred across the size spectrum. For example, small-cap growth ETFs have redeemed $750 million (5.9% of assets) since the start of April, while small-cap value ETFs have issued $150 million (1.0% of assets). Similarly, large-cap growth ETFs have redeemed $4.6 billion (4.9% of assets), while large-cap value ETFs have issued $2.6 billion (2.5% of assets).
“These flows mark a huge change in trend,” Santschi said. “Investors were favoring growth over value for most of the past year.”
TrimTabs believes the Federal Reserve’s “tapering” and the disappointing recent performance of recent technology and biotechnology IPOs are probably driving investors to re-evaluate the prospects of growth companies. It also suggested some investors may want to start taking advantage of the sell-off.
“Our liquidity indicators are bullish almost across the board, and ETF investors tend to be poor market timers,” noted Santschi. “While plenty of social media, cloud computing, and biotechnology firms are still grossly overvalued, stock pickers may want to consider scooping up other growth names that have been dumped along with the tech and biotech highflyers.”
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TrimTabs Investment Research is the only independent research service that publishes detailed daily coverage of U.S. stock market liquidity—including mutual fund flows and exchange-traded fund flows—as well as weekly withheld income and employment tax collections. Founded by Charles Biderman, TrimTabs has provided institutional investors with trading strategies since 1990. For more information, please visit www.TrimTabs.com.

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