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U.S. Stock ETFs Record Biggest Withdrawals Since 2010

Investors withdrew the most money from U.S. equity exchange-traded funds since January 2010 last month amid concern about the Federal Reserve’s plans for stimulus and possible military action against Syria.

About $13.5 billion flowed out of U.S. equity ETFs in August (SPX), the first decrease since October, according to data compiled by Bloomberg from about 1,500 funds. The Standard & Poor’s 500 Index slid 3.1 percent last month as the SPDR S&P 500 ETF Trust (SPY), which tracks the benchmark index, lost $14 billion in August, more than any other U.S. equity ETF.

The reversal in flows came after the S&P 500 gained almost 153 percent since its 12-year low in March 2009, outlasting the average length of bull markets since 1946. The S&P 500’s drop in August, the worst in 15 months, was triggered as Fed policy makers signaled they support stimulus cuts this year and the U.S. considered an attack on Syria’s government.

“Headlines around Syria and a general negative tape during the month contributed to outflows,” said Walter Todd, who oversees about $950 million as chief investment officer of Greenwood Capital Associates LLC in Greenwood, South Carolina. “Syria just adds more uncertainty to many other issues on the table.”

About $76.7 billion went into U.S. equity ETFs in 2013, more than twice the amount at this time last year. July saw $32 billion come into securities tracking American equities, the second-most on record. ETFs are baskets of equities and other assets that trade on exchanges throughout the day like stocks.

Syria Concern

The S&P 500 posted its biggest drop in nine weeks on Aug. 27, sliding 1.6 percent, after Secretary of State John Kerry said the U.S. will hold Syria’s government accountable for allegedly using chemical weapons.

Funds tracking larger U.S. companies in August erased 58 percent of inflows for the year as $14.1 billion was taken out of those securities, data compiled by Bloomberg show.

The August deposits pushed the SPDR S&P 500 ETF to one of the 100 worst-ranked funds as measured by flows after July lifted it to the best, data compiled by Bloomberg show. The PowerShares QQQ, which tracks the performance of the Nasdaq 100 Index, saw $1.1 billion in outflows for the month.

Mutual funds that invest in U.S. shares had about $790 million of outflows for the first three weeks of August, after more than $13 billion was sent to the funds in first seven months of 2013, according to data from the Washington-based ICI released Aug. 28. Data for the last week of August is not available yet. Almost $400 billion was withdrawn from March 2009 to the end of last year, even as the S&P 500 more than doubled.

To contact the reporters on this story: Alex Barinka in New York at abarinka2@bloomberg.net Whitney Kisling in New York at wkisling@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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