ETF creations/redemptions – investors being careful and looking for smaller fees

By: ispeculatornew
Date posted: 02.12.2010 (5:00 am) | Write a Comment  (3 Comments)

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January was a very volatile month in the markets and it looks like many investors were trying to get out of large caps and since SPY is by far the biggest ETF, it is not shocking to see it at the top of the redemptions table. But to see it so far ahead certainly raises some questions. There are many things at play of course and institutional investors end of year movements probably played for a lot. For example, many investors do not want to hold too much cash at year-end since they need to report their holding so holding an ETF like SPY “alters reality” slightly to avoid looking under invested. But when January comes along, it becomes very easy to simply get out of the position.

Here are the most redeemed ETF’s in January:

TickerNamePricePE RatioPE Next YearReturn YTDSales GrowthAnalyst ratingBook ValueBetaRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg Growth
AAPLApple Inc587.9914.1512.426.89.24.22139.460.89184.741.2353.24
RAXRackspace Hosting Inc26.6544.8529.7-31.2317.233.767.481.0211.0823.4526.1

But one thing I found very interesting was the fact that EEM was the 2nd most redeemed. Why so? Because if you look at the table of the most created ETF’s, VWO, the EEM equivalent from Vanguard is actually the most created, which would tend to indicate the fact that investors are finally catching on to the fact that I discussed last month when I compared the two emerging market ETF’s. This will eventually lead to IShares/Blackrock diminishing the fees on EEM but in the meantime, why would you buy or hold EEM?

And as we saw, with investors being fearful of risk and getting out of large caps (SPY), they have been moving towards bond ETF’s and seeing investors looking for ETF solutions to hedge inflation. Vanguard actually has 4 of the top 10 spots including the REIT ETF VNQ that I discussed last week.

Without further wait, here are the 10 most “created” ETF’s in January:

XOMExxon Mobil CorpDividend increase from $0.63 to $0.69, a 9.5% increase
BAXBaxter InternationalDividend increase from $0.49 to $0.52, a 6.1% increase
IVZInvesco LtdDividend increase from $0.225 to $0.25, a 11.1% increase

Any thoughts? Do any of you still hold EEM?

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  1. Pingback by next linkstuff — February 12, 2010 @ 9:20 pm

    […] The Intelligent Speculator wrote about ETF creations/redemptions – investors being careful and looking for smaller fees. […]

  2. Comment by John — February 13, 2010 @ 7:55 am

    I actually own EEM, but since I know that commissions will go down, I’m quite ok with my positions!!

    Do you think it will happen soon? Thanks!

  3. Comment by IS — February 25, 2010 @ 7:36 am

    @John – Difficult to say but I would say yes, because they are losing market position very quickly right now, I would say it is becomming more “urgent” every month.

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