Hot Money Rushes Out of BlackRock's Core S&P 500 Fund: ETF Watch

(Bloomberg) -- Hot money fled a major U.S. equity exchange-traded fund last week at a pace never seen before.

Investors yanked nearly $11 billion from BlackRock Inc.’s iShares Core S&P 500 ETF, ticker IVV, last week, its largest weekly outflow since its inception in 2000, according to data compiled by Bloomberg. That’s about three-and-a-half times the biggest prior outflow, which occurred in 2014.

The activity mirrored last week’s defensive trading, as new U.S. tariffs on Chinese goods ignited trade war concerns. U.S. stocks tumbled six percent, the largest weekly drop in more than two years, while a bid for haven assets like gold and Treasuries materialized. A deeper look into the trading shows institutions may have been using BlackRock’s fund as a placeholder for some positions.

“Some of that $11 billion could be retail investors who were just a little spooked last week, but Schwab and Vanguard, which are almost wholly used by that crowd, didn’t see much flows,” said Eric Balchunas, a senior ETF analyst at Bloomberg Intelligence. “IVV is appealing more and more to the institutional trading crowd.”

Institutional investors have been increasing their ownership of the ETF, a cheaply priced U.S. stock fund that’s typically aimed at retail customers and financial advisers. Almost 1,600 institutions hold it, compared with only 475 in 2010, according to data compiled by Bloomberg. Representatives from BlackRock declined to comment.

The trend jibes with previous comments from BlackRock. In a press release earlier this year the firm said, “institutions [in 2017] continued to expand usage of iShares ETFs as financial instruments, alongside swaps, futures, and single-name securities, and as a reference asset for OTC and listed derivatives.”

--With assistance from Sophie Caronello

To contact the reporters on this story: Sarah Ponczek in New York at sponczek2@bloomberg.net, Dani Burger in London at dburger7@bloomberg.net.

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Eric J. Weiner, Dave Liedtka

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