Yesterday we spoke about the Mid-Cap Equity space by way of VXF (Vanguard Extended Market, Expense Ratio 0.08%, $5.8 billion in AUM), which has had healthy inflows as of late.
It appears that VXF is not alone in experiencing late July creation activity, and a handful of Mid-Cap Equity ETFs have been in heavy turnover as of late as portfolio managers seem to be noticeably tilting to the space. Funds in addition to VXF that have seen inflows worth mentioning in recent sessions are specifically IJH (iShares Core S&P Mid-Cap, Expense Ratio 0.07%, $40 billion in AUM) and IJK (iShares S&P Mid-Cap 400 Growth, Expense Ratio 0.25%, $6.9 billion in AUM).
The two funds have reeled in $1 billion and about $280 million compared to VXF’s $770 million in recent sessions via obvious investor appetite for Mid-Cap stocks. Year-to-date IJH has reeled in $3.6 billion in new assets which is notable even given the fund’s $40 billion asset base, while IJK has attracted about $810 million and VXF just shy of $1 billion respectively during this time frame.
When we look at performance in the space Mid-Caps as measured by the S&P 400 Mid-Cap Index versus the S&P 500 Index have trailed year-to-date, and by a considerable margin of nearly 400 basis points.
There is similar, but less pronounced under-performance by Mid-Caps when compared to Large Caps when we look back at the trailing one year-period, as well as the trailing three-year period, so it is possible that portfolio managers are potentially anticipating that Mid-Caps will narrow the performance gap that is evident in 2017 between Mid and Large Cap stocks and this may explain the sudden allocations to funds in the space via creation flows.
It is helpful for us to look at the top ten holdings of a fund like IJH for example in order to get a flavor for which companies are the largest in terms of market capitalization in the Mid-Cap space and potentially market movers, and furthermore many of these companies are far from “household names.” Presently we see the weightings in IJH as follows: 1) CDNS (0.63%), 2) MSCI (0.60%), 3) TRMB (0.58%), 4) CDK (0.58%), 5) TFX (0.57%), 6) SIVB (0.57%), 7) HII (0.56%), 8) NVR (0.56%), 9) ATO (0.55%), and 10) DPZ (0.54%).
The iShares Core S&P Mid Cap ETF (NYSE:IJH) was trading at $176.30 per share on Thursday afternoon, down $0.83 (-0.47%). Year-to-date, IJH has gained 7.34%, versus a 11.36% rise in the benchmark S&P 500 index during the same period.
Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.
Paul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.
He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.