Industry Updates

S&P 500 equal weight ETF outflows increase as investors rotate out of value

XDEW recorded $2.5bn in outflows over the past three months

Theo Andrew

DWS building

Investors have yanked $2.5bn from DWS’s S&P 500 equal weight ETF over the past three months in a sign the value play is continuing to wane.

Value found favour among investors after Pfizer published its vaccine results last November. The $4bn Xtrackers S&P 500 Equal Weight UCITS ETF (XDEW) has returned 29.8% so far this year, as at 28 September, versus 19.1% for the market cap-weighted Xtrackers S&P 500 UCITS ETF (XDPE) over the same period.

While flows remain positive at $702.7m year to date, XDEW saw an asset exodus of $847m in the week ending 24 September, taking outflows to $2.3bn over the past two months, according to data from ETFLogic.

The outflows could mark a step change in equal weighted products that posted significant inflows at the turn of the year as investors bet on a cyclical shift away from mega cap growth stocks in favour of a value tilt on their portfolios.

Toby Dudley-Smith, head of passive sales for the UK at DWS, said investors were now looking to book profits from the cyclical shift into value.

“XDEW has registered significant inflows over the past 12 months as investors sought a tool to balance exposure to sectors which had experienced hefty growth early in the post-dip recovery,” he said.

“Naturally, we expect to see some redemption activity as trades are closed out and clients re-allocate their holdings.”

Investor sentiment has been edging towards a rotation away from value since the mid-point of the year, with many not banking on a tailwind for the strategy.

In July, investors pulled almost a combined $1bn from the $2.2bn iShares EURO STOXX Banks 30-15 UCITS ETF (EXX1) and $812m Xtrackers MSCI USA Financials UCITS ETF (XUFN).

In addition, the $3.5bn iShares Edge MSCI Value Factor UCITS ETF (IUVF) has seen $2.6bn outflows over the past three months. Despite roughly $1.4bn of the being an institutional switch into its mirror ESG strategy – the iShares MSCI USA Value Factor ESG UCITS ETF (IUVE) – net outflows for IUVF stand at $1.2bn since July.

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