Let's take a look at exchange-traded funds for the first half of 2023.
I'm going to do this by reviewing the metric of investor inflows and will walk you through the methodology here. Using data from Factset, I downloaded as much monthly price and shares outstanding history as I could find on U.S.-listed exchange-traded funds including leveraged ETFs and exchange-traded notes, as well. From this, I calculated a history of assets under management (AUM) by multiplying share price by shares outstanding. I then went on to calculate an estimate of month-to-month net investment flows for each ETF by comparing the change in AUM to the beginning period AUM multiplied by the period return. If the month's starting AUM multiplied by the month's price return was less than the month's ending AUM, then the fund saw inflows and vice-versa. While this flow calculation is relatively S.W.A.G.-ish, I like to think it leans more to "S." than the "W.A." side of things.
Here we go.
Let it Flow
In determining the top flow getters, I compared year-to-date flows to AUM levels at Dec. 31, 2022. For example, a category that started 2023 with $1 billion and saw $100 million of inflows would read "Category X (10%)". To be clear, the list doesn't represent the largest absolute flow getters but rather, the largest recipients of investor dollars based on the category size in dollars.
Of the top 10 flow-getters, six were from equities and included No. 3 Information Technology (31.90%), No. 4 Communication Services (28.45%), No. 6 Consumer Discretionary (14.65%), No. 7 Large Cap (9.89%), No. 8 Theme (9.03%), and No. 10 Total Market (5.39%). Interestingly, these were also represented in the Top 10 list of returns with Large Cap at No. 1, Total Market No. 2, Information Technology No. 3, Theme No. 5, Communication Services No. 7, and Consumer Discretionary at No. 8. Given the AI-powered bull run we have seen so far this year these results shouldn't be too surprising, especially since the three sectors alone account for almost 50% of Large Cap (as represented by the SPDR S&P 500 ETF Trust (SPY) . Indeed, XLK, XLC, and XLY (the SPDR Sector ETFs for technology (XLK) , communication services (XLC) , and consumer discretionary (XLY) ) were up 37.29%, 34.99%, and 29.68% as of the June 28 market close. As for the "Theme" segment, that seems to be Factset's catch-all category for all the non-GICS stuff like renewable energy, robotics, AI, metaverse, anything with "disruptor" or "innovation" in the name but quizzically also the SPDR S&P Homebuilders ETF (XHB) . Leading this Theme group was the Microsectors FANG+ Index 3X leveraged ETN (FNGU) , up 309% year-to-date followed by another Microsectors fund, the Microsectors Solactive FANG & Innovation 3-times Leveraged ETF (BULZ) , gaining 227% so far this year.
Now that I've confirmed what you already suspected, how about seeing what has been slightly off our collective radar?
While the dollar has been strong this year, despite some stories warning about its demise as the world's reserve currency it is not the only asset in currency-land that has been running in 2023. Another currency-adjacent asset that has seen an impressive first half is our old volatile friend, bitcoin, up just over 80% year-to-date through June 28 and seeing a 48% in AUM due to inflows. Bitcoin exposure funds like (BITO) , (BTF) , (XBTF) , and (DEFI) all saw outsized returns. Although BITO holds the AUM crown among the four, it trailed all three by roughly 15% YTD through June 28.
The second largest relative asset grabber was? Sugar, as represented by the lone Teucrium Sugar Fund (CANE) . CANE saw a 41% bump in AUM due to investor inflows, on top of producing a roughly 35% return YTD through June 28.
A U.S. dollar play shows up at No. 5 with the "Long USD, Short JPY" category represented by the ProShares UltraShort Yen (YCS) . For those not familiar with ProShares' naming convention, anything labeled "UltraShort" is 2X inverse levered.
Another category that shows up in the flow Top 10 list is another perennial favorite at No. 9, gold. While there are a number of physical gold products out there, $57 billion SPDR Gold Shares (GLD) , and the $27.6 billion iShares Gold Trust (IAU) dominate this market. I guess there are still investors looking to hedge themselves the old-fashioned way. If you're wondering about my position on gold, I was always told growing up that gold was the thing you took with you when your town or village was about to be overrun by an invading force. Aside from that, there's not too much use for it as an investment, let alone an inflation hedge. That's what I get for having a father who was an economist.
Wrap It Up
While not an extensive review of the first half of 2023, this should give you some insight beyond the headlines. One final note: You may remember I wrote about a fund launch back in September of 2022, the Noble Absolute Return ETF (NOPE) from veteran fund manager George Noble. I'm sorry to say that the fund has not had a good start, down just over 67% year-to-date. Still, the fund seeks to perform over "a full market cycle" so there is still plenty of time for it to make up any lost ground. Current positioning includes 35% allocated to cash and approximately 44% allocated to United Airlines (UAL) , Delta Airlines (DAL) , and American Airlines (AAL) . If we do get a softer than expected landing, the airlines should help but hopefully, the issuer can find a place to put some of that cash to work.
That's all for now and see you in the third quarter.
