Why International ETFs are Growing Faster than US ETFs

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Why International ETFs are Growing Faster than US ETFs

• International ETFs saw a surge in inflows in February.
• They rose at a faster rate than U.S. ETFs.
• A driving factor was the performance of international stocks versus U.S. stocks.

International ETFs saw inflows spike in February.

There was a surge in interest among investors on international equity exchange-traded funds (ETFs) in February, as investors seek to diversify more assets from the volatile U.S. stock market.

ETFs that invest in international stocks saw inflows more than double in February, rising from $6.5 billion in January to $15.4 billion in February, according to ETF.com.

Overall, international equity ETFs saw assets under management climb about 2% in February to $1.63 trillion.

The overall numbers pale in comparison to U.S. equity ETFs, but the growth rate for international ETFs was much faster in February, according to ETF.com data.

Specifically, ETFs that invest predominantly in U.S. stocks generated $52.2 billion in assets in February. That’s roughly half the $110.8 billion that ETFs brought in overall last month. However, that is down from the $56.1 billion in inflows that US equity ETFs saw in January. The January haul for US equity ETFs was a higher percentage of the $107 billion in total ETF inflows in January.

Also, total assets under management in US equity ETFs fell about 3% to $6.7 trillion in February.

Why International ETFs Saw More Inflows

The surge in inflows for international equity ETFs in February stems from a few different factors. One, U.S. stocks struggled in February, with most indexes down for the month due to concerns about the economy, tariffs, inflation, and geopolitics, among other issues.

The index was the hardest hit, dropping 5.4% in February, while the S&P Midcap 400 fell 4.3%. The tanked 3.9% while the was off 1.4% and the dropped 1.3%. The only positive domestic index for the month was the Russell 1000 Value (NYSE:), up 0.4%.

At the same time, international stocks have performed much better. For example, the MSCI EAFE index (NYSE:), which tracks stocks outside of North America, gained about 4% in February and is up roughly 8% YTD.

Stocks in Europe have performed even better, as the Index gained about 6% in February and has risen roughly 11% YTD.

Those returns have driven international ETFs higher, as most of the top-performing ETFs this year are international, including those that track stocks in Europe.

For example, the SPDR Euro Stoxx 50 ETF (NYSE:) has returned 13.1% YTD while the iShares MSCI Eurozone ETF (NYSE:) is up 11.4%. Further, the Vanguard Europe ETF (NYSE:) has returned 10.2% YTD.

That’s likely due to European stocks reporting better earnings, on average, than their U.S., counterparts. According to a recent report from FactSet’s John Butters, large cap companies that generated more than 50% of their revenue from outside the U.S. in Q4 saw a 5.9% revenue growth rate. In comparison, companies that made more thane 50% of their revenue in the U.S. saw revenue growth of 5.0%. It will be interesting to see if that gap widens in Q1.

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#International #ETFs #Growing #Faster #ETFs

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