US Sector Asset Flows Vs Total Returns – Following The Money

• Energy and Healthcare have strongest relative asset flows among stock sectors
• Energy sector appears to be in accumulation stage
• Healthcare marches on
• Info Technology shows above average asset flow strength, but less than Energy and Healthcare
• Utilities sector may be in distribution stage

Asset flows can be indicators of developing strength or weakness of a fund, which sometimes confirms price movements and sometimes diverges from prices. If asset flows diverge from price patterns, there is a suggestion of a trend reversal in the prices. While not diagnostic alone, divergence between price patterns and asset flow, should trigger further investigation of fundamental and technical factors. Let’s look at relative asset flows for MSCI US sectors as they have been realized through Vanguard sector ETFs.  Those ETFs obviously do not show all sector asset flows, they do show relative flows within the Vanguard sector family. By focusing on relative asset flows, we think the Vanguard ETFs provide a reasonable window. Asset flows are net of asset performance. These are the symbols for the Vanguard ETFs based on the 10 MSCI Global Industry Classification Standard “GICS” system.

Figure 1 illustrates the relative flows using a red, yellow, green shading method for the preriods:

• 2012 – March 2015
• 12 months
• 6 months
• 3 months
• 1 month

Healthcare showing strong flows is not at all surprising, given the strong price performance for a considerable time. The surprise, if any, is the strong flows into the energy sector. It looks like investors have seen long-term value in energy and have been putting money there. Utilities have shown the weakest flows.