Volatility Fear Drives Investors to Bond ETFs -- Journal Report
June 09 2019 - 10:33PM
Dow Jones News
By Gerrard Cowan
As Investors see increased volatility on the horizon, many
believe that bond-focused ETFs can help guide them through the
storm.
BlackRock Inc., the world's largest asset manager, says it has
seen increased investment in a number of its fixed-income
exchange-traded funds, as well as in its "minimum volatility" fund
-- iShares Edge MSCI Min Vol USA ETF (USMV), a $28 billion ETF that
has returned 13.3% this year through May.
Investors are looking to ETFs not so much as a haven in
turbulent markets, but as a risk-management tool, says Daniel
Prince, head of iShares U.S. Wealth Advisory Product Consulting at
BlackRock.That explains the interest in the USMV fund by investors
taking a more-defensive posture, he says.
An ETF study published by Charles Schwab & Co. in May found
that 61% of ETF investors anticipate an increasingly volatile
market in the second half of the year. Almost half of those
surveyed -- 44% -- plan to increase their ETF investments as a
result, while 34% believe it will have no impact on their holdings
and 22% say it will prompt them to remove money from ETFs.
(Schwab's 2019 ETF Investor Study, the ninth such from the firm,
was based on an online survey of 1,500 investors between the ages
of 25 and 75 with at least $25,000 in assets who had purchased or
sold ETFs in the past two years.)
Some 74% of those surveyed said it was a good time to invest in
bond-focused ETFs, while 61% said they actually planned to do so.
In terms of sectors, technology was a notably popular choice, with
69% planning to invest in stock ETFs in the area; the next-best
performer was financial services, at 50%.
Although many see ETFs as a useful tool in volatile markets,
some investors may well have planned to increase their investments
anyway, perhaps for different reasons, says Heather Fischer, vice
president of Charles Schwab's mutual-fund, ETF and 529 platforms.
"Investors are characterizing ETFs as a tool to help them achieve
their goals and ride out volatile markets, not as a 'safe haven' on
their own," she says.
The Schwab research noted the importance of millennials in the
ETF market: 42% of their portfolios are currently dedicated to
ETFs, on average, compared with 34% for Generation X. They are also
the most likely group to believe ETFs can help them through market
volatility, while their interest in technology funds is a driver of
the latter's popularity, according to Schwab.
The importance of the younger cohort also was a key theme of an
ETF study published by Vanguard Group in March. Millennials are the
biggest buyers of ETFs relative to the broader population, says
Rich Powers, head of ETF product management in Vanguard's portfolio
review department.
Mr. Cowan is a writer in Northern Ireland. He can be reached at
reports@wsj.com.
(END) Dow Jones Newswires
June 09, 2019 22:18 ET (02:18 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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