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Strong bank results help drive ETF demand

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Strong bank results help drive ETF demand

Todd Rosenbluth is directorof exchange-traded fund and mutual fund research at S&P Global MarketIntelligence. The S&P Global Market Intelligence rankings for ETFs andmutual funds, available through MarketScope Advisor, are quantitatively derivedand based on performance, risks, costs and a qualitative analysis of theunderlying holdings.

Eventhough second-quarter earnings results for the S&P 500 index are coming instronger than the Capital IQ consensus estimates and stocks rallied into recordterritory during the seven-day period ended July 20, investors redeemed acombined $2.8 billion from U.S.-domiciled equity mutual funds and ETFs.

Whilesome asset managers benefitted as ETFs pulled in $4.3 billion of new money,others were hurt by the $7.1 billion pulled out of mutual funds, according toThomson Reuters Lipper data.

ETFsholding international stocks were the strongest gatherers with $3.0 billion ofnew inflows driven by BlackRockInc.'s iShares MSCI Emerging Markets (EEM). The ETF gathered $2.8billion during the week that included China reporting 6.7% second quarter GDPgrowth. China is EEM's largest country, at 25.2% of assets as of July 21.

Meanwhile,ETFs holding U.S. stocks had $1.3 billion of net inflows, led by SSGA FundsManagement's Financial Select Sector SPDR (XLF). The largest financial sectorETF received $426 million in new assets during the seven-day period, aided bystronger results and a favorable loan demand from its top holdings, , andU.S. Bancorp. With theinflows, this ETF erased some prior-half outflows and had $15.57 billion inassets. As of July 21, 15 of the S&P 500 financial sector constituents beatthe Capital IQ consensus forecast, while five were in-line and another fivefell short.

Incontrast, mutual funds that owned predominantly U.S. stocks continued to sufferfrom redemptions. The $5.8 billion in outflows was the 24th-consecutive week,despite generating an average 0.82% gain. While moderately lower the priorweek's $6.0 billionin redemptions, pressure remained high for these actively managed products. Inthe seven-day period ended July 20, large-cap portfolios had $3.7 billion ofoutflows, while small-cap mutual funds shed $1.1 billion of assets.

ThomsonReuters Lipper did not provide fund specific mutual fund outflows, butAmerican Beacon AdvisorsInc., FidelityManagement & Research Co., Goldman Sachs Group Inc. and activelymanage some of the Lipper small-cap funds with the most assets.

Taxablebond mutual funds remained a bright spot for the second straight week, takingin $2.4 billion of new money. Corporate high yield funds gathered $800 millionof new money, while international and global debt fund portfolios were a closesecond with $700 million, as investors continue to seek higher income amid lowyields for U.S. government products. Taxable bond ETFs gathered a more modest$600 million of new assets.