ETF Investors Target High Quality Stocks, Safe Havens in Bank Crisis

Here’s where investors have been putting their money since the collapse of Silicon Valley Bank.

sumit
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Senior ETF Analyst
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Reviewed by: Sumit Roy
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Edited by: Sumit Roy

March 9: That’s the date when the investment world became acutely aware that something was amiss at America’s regional banks. Silicon Valley Bank had failed to raise capital to plug a hole in its balance sheet, and the bank’s depositors collectively attempted to take a whopping $42 billion out of their accounts all at once. 

A day later, the bank would be deemed insolvent, setting off a crisis in the broader regional bank industry—one that’s only been contained thanks to the support of the government. 

What have ETF investors done since the banking crisis began? 

Well, they’ve been plowing their money into safe-haven Treasuries and high quality stocks. 

According to ETF.com data on fund flows for the period between March 9 and March 20, the SPDR S&P 500 ETF Trust (SPY) was the biggest asset gatherer, with inflows of $7.5 billion. 

But more interestingly, the iShares MSCI USA Quality Factor ETF (QUAL) picked up an impressive $5 billion, a hefty sum for what today is a $23 billion fund. QUAL holds stocks with “quality characteristics,” such as high return on equity, stable year-over-year earnings growth and low financial leverage. 

The Vanguard Dividend Appreciation ETF (VIG), which has a different mandate but also holds what you could call high quality stocks (those that have increased their dividends for 10 or more consecutive years) picked up $1.7 billion in the period. 

Meanwhile, Treasury ETFs, like the iShares 7-10 Year Treasury Bond ETF (IEF), the iShares U.S. Treasury Bond ETF (GOVT) and the SPDR Bloomberg 1-3 Month T-Bill ETF (BIL) were in demand as well. Interest rates plummeted in the aftermath of SVB’s collapse, sending prices of these ETFs sharply higher. 

Finally, bargain hunters piled into the SPDR S&P Regional Banking ETF (KRE). The fund, whose constituents are at the epicenter of the crisis, gathered $1.7 billion of assets in a period in which its price fell by 17%. 

 

Flows for 03/09/2023 - 03/20/2023 

Top 10 Creations (All ETFs)

TickerFundNet Flows*
SPYSPDR S&P 500 ETF Trust7,546.67
QUALiShares MSCI USA Quality Factor ETF4,996.10
IEFiShares 7-10 Year Treasury Bond ETF3,159.07
GOVTiShares U.S. Treasury Bond ETF2,699.89
BILSPDR Bloomberg 1-3 Month T-Bill ETF2,495.65
VIGVanguard Dividend Appreciation ETF1,748.59
KRESPDR S&P Regional Banking ETF1,677.59
SPTISPDR Portfolio Intermediate Term Treasury ETF1,515.61
SGOViShares 0-3 Month Treasury Bond ETF1,344.37
VTIVanguard Total Stock Market ETF1,341.05

 

 

Email Sumit Roy at [email protected] or follow him on Twitter @ sumitroy2    

Sumit Roy is the senior ETF analyst for etf.com, where he has worked for 13 years. He creates a variety of content for the platform, including news articles, analysis pieces, videos and podcasts.

Before joining etf.com, Sumit was the managing editor and commodities analyst for Hard Assets Investor. In those roles, he was responsible for most of the operations of HAI, a website dedicated to education about commodities investing.

Though he still closely follows the commodities beat, Sumit covers a much broader assortment of topics for etf.com, with a particular focus on stock and bond exchange-traded funds.

He is the host of etf.com’s Talk ETFs, a popular video series that features weekly interviews with thought leaders in the ETF industry. Sumit is also co-host of Exchange Traded Fridays, etf.com’s weekly podcast series.

He lives in the San Francisco Bay Area, where he enjoys climbing the city’s steep hills, playing chess and snowboarding in Lake Tahoe.