In 5 months, ETF inflows in equities eclipsed 2020 totals
The pace of fundraising in 2021 from exchange traded funds is simply breathtaking.
Last month, equity-based ETFs added $ 41 billion in inflows, bringing the year-to-date total to $ 295.4 billion. In five months, equity ETFs eclipsed their inflows of 2020.
Unsurprisingly, the eagerness of investors – both professional and retail – to embrace ETFs benefits a range of funds and issuers. Take the case of WisdomTree (NASDAQ: WETF), which receives a big boost from WisdomTree Emerging Markets ETF, former state-owned enterprises (XSOE).
“WisdomTree regained its place in the industry’s top 10 in May. It raised $ 585 million last month and generated over $ 2.2 billion in cash flow for the year to date, ”Morningstar analysts Ryan Jackson and Ben Johnson write. “XSOE has been the crown jewel of the business, pulling in $ 1.3 billion for the year to date. This fund targets emerging market equities but excludes all public companies, allowing it to avoid some of the unique governance risks that can affect emerging market strategies.
An impressive stretch for ‘XSOE’
On a stand-alone basis, XSOE’s competence in asset raising in 2021 is impressive. This is even truer when you consider that emerging market equities are showing mixed performance. Additionally, some Chinese tech and internet companies including Alibaba (BABA), Ant Financial, Tencent, JD.com (JD) and others have come under intense regulatory scrutiny.
Even with that, XSOE is up 7.3%. While this lags behind the MSCI Emerging Markets Index, if history is any accurate indicator, this lagging status could prove to be fleeting. For the three years ending June 2, the WisdomTree ETF is 44.6% higher compared to 31.2% for the benchmark emerging markets index. Additionally, XSOE’s annualized volatility over this period is slightly lower than that of the MSCI Emerging Markets Index, according to ETF Replay data, confirming superior risk-adjusted returns.
During this period, the maximum drawdown of the XSOE was 150 basis points lower than that of the MSCI Emerging Markets Index.
XSOE, which debuted in December 2014, is one of WisdomTree’s many emerging market ETFs that shy away from state-run companies. The others are the WisdomTree China ex-State-Owned Enterprises Fund (NasdaqGM: CXSE) and the WisdomTree India ex-State-Owned Enterprises Fund (IXSE), the new member of the trio. Over the past 12 months, the CXSE has largely beaten the MSCI China Index.
CXSE and XSOE charge 0.32% per annum while the annual fee on IXSE is 0.58%.
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The opinions and forecasts expressed herein are solely those of Tom Lydon and may not come to fruition. The information on this site should not be used or interpreted as an offer to sell, a solicitation of an offer to buy or a recommendation for any product.