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Vanguard, Schwab Shined During Volatile August

Among the biggest asset managers, Vanguard and Charles Schwab stood out from the pack.

Hurt by a rising level of market volatility, exchange traded funds collectively experienced net outflows in August, with some of the industry’s largest and frequently traded funds incurring sizable redemptions. However, among the biggest asset managers, Vanguard and Charles Schwab stood out from the pack and gathered net new money for the month, according to First Bridge Data, a CFRA company acquired in August.

Vanguard pulled in $6.6 billion of new money last month and demand was broad based. Led by Vanguard S&P 500 (VOO) and Vanguard Total Bond Market (BND), 20 of the firm’s products gathered more than $100 million of net inflows, with an equal split between equity and fixed income funds. Six of these funds pulled in $500 million.

Within the equity category, dividend-focused Vanguard Dividend Appreciation (VIG) and Vanguard High Dividend Yield (VYM) gathered a combined $770 million in August as investors sought out both the relative safety and income generation of the ETFs. In addition, Vanguard successfully gathered a nearly similar amount in low-duration Vanguard Short-Term Inflation-Protected Securities (VTIP) and Vanguard Short-Term Corporate Bond Index Fund (VCSH).

Vanguard is the second-largest ETF provider, based on assets under management, behind iShares, which had $3.1 billion of net outflows in August. Investors pulled $8.2 billion alone from the firm’s two well-diversified emerging markets ETFs — iShares MSCI Emerging Markets (EEM) and iShares Core MSCI Emerging Markets (IEMG), likely tied to ongoing trade concerns between the U.S. and China. Furthermore, $1.1 billion was redeemed from its two single-country China funds — iShares MSCI China (MCHI) and iShares China Large-Cap (FXI).

Nonetheless, iShares had 12 funds that gathered $500,000 or more in net inflows in August, led by iShares Core S&P 500 (IVV) and iShares Edge MSCI Min Volatility USA (USMV).

Charles Schwab is the fifth-largest ETF provider, behind SSGA and Invesco, but successfully gathered $2.3 billion of net inflows in August. The firm had only two products, Schwab US TIPS (SCHP) and Schwab US Large-Cap (SCHX), that gathered more than $500 million or more of net inflows, less than peers. However, only two of its funds had $100 million or more of net outflows, a sign of general investor loyalty.

Schwab Intermediate-Term US Treasury ETF (SCHR) and Schwab US Aggregate Bond (SCHZ) were also among the firm’s popular ETFs during August.

In contrast, SSGA and Invesco suffered net outflows as their largest funds, SPDR S&P 500 (SPY) and Invesco QQQ Trust (QQQ), dragged down overall assets. These industry heavyweights masked favorable demand at other products.

For example, SPDR Gold Shares (GLD) gathered approximately $2.7 billion in assets, while three Select Sector SPDR Funds took in an additional $2 billion. Meanwhile, Invesco pulled in nearly $600 million across four low-volatility funds, including Invesco S&P MidCap Low Volatility (XMLV).

CFRA ratings on 1,500 equity and fixed income ETFs can be found on MarketScope Advisor. Our forward-looking research is based on a combination of holdings-level and fund-specific attributes, including costs.

Todd Rosenbluth is the director of ETF and mutual fund research at CFRA. Learn more about CFRA's ETF research here.

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