US Exchange-Trade Funds Favouring Emerging Markets With Focus In Loss Making Biotech and Pharmaceutical Companies

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Judging by the capital flow into US Exchange-traded funds (ETFs), there is an indication that investors favor emerging-market stocks compared to other assets including, US equities.

In the last five days through Thursday, the largest ETF acquiring emerging-market shares saw more cash inflows relative to any of the over 2,400 other funds in exchanges. This sent the Vanguard FTSE Emerging Markets ETF to its largest weekly inflow in almost two years.

On the other hand, the $324 billion SPDR S&P 500 ETF saw outflows of over $4.5 billion, which was the worst among peers. Interestingly, other funds investing in gold, real estate, global bonds, silver, inflation-linked securities, and the Nasdaq 100 Index shares equally lost money. Surprisingly, dollar debt, which is usually one of the top segments within emerging markets, is equally losing out on stocks.

Biotech and Pharma companies’ tops list of most ETFs-owned stocks

Currently, loss-making biotech and pharmaceutical firms are dominating the list of most owned US stock by ETFs after the dramatic buying splurge last year. Usually, unprofitable firms are popular among ETFs focusing on narrow investment areas, especially Ark Invest-run ETFs. Around 13 out of the 50 stocks in which ETFs accounted for the largest free-float ownership at the end of 2020 are pharmaceutical companies.

Three of the four most intensely held include Personalis, where ETFs held 38%, AquaBounty Technologies, at 52%, and Syros Pharmaceuticals, whey they held 31.3%. Ten of the thirteen pharmaceutical companies made losses over their last financial year, according to Financial Times.

BUZZ ETF launches

The VanEck Vectors Social Sentiment ETF (NYSEAMERICAN:BUZZ) has launched amid a lot of buzz. This ETF tracks 75 large-cap US stocks’ index benefiting from positive investor sentiment on news sites, social media, and other online platforms. The launch, which was announced on Twitter, was accompanied by a meme video featuring Barstool Sports founder Dave Portnoy and a famous participant in the recent GameStop (NYSE:GME) trading frenzy. The ETF’s top hooding include American Airlines Group (NASDAQ:AAL), Twitter (NYSE:TWTR), DraftKings (NASDAQ:DKNG), and Ford Motor (NYSE:F).

The growing interest in ESG ETFs

There is growing momentum in the Xtrackers MSCI USA ESG Leaders Equity ETF (NYSEAMERICAN:USSG) after it reached $3 billion assets under management last month. The growing interest in the product demonstrates increasing investor interest in environmental, social, and governance ETFs. Most importantly, the ETF tracks large and mid-cap US stocks with return and risk characteristics similar to MSCI USA Index but with a bias towards firms with strong ESG features relative to industry peers.

Cambria Sovereign Bond ETF converted to Cambria Tail Risk ETF

Cambria ETF Trust and Cambria Investment Management LP have converted Cambria Sovereign Bond ETF to the Cambria Global Tail Risk ETF. The fund’s investment strategy seeks to limit the considerable market risk downside in global ex-US equities. Meb Faber, the ETF’s portfolio manager, said that FAIL will be a natural complement to their US-focused Cambria Tail Risk ETF and offer an option to traditional inverse funds to hedge ex-US equity market risk.

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