Wall Street ETF gets US$211M mystery inflow, most since 2008
Seemingly out of nowhere, an exchange-traded fund tracking the fortunes of Wall Street has been lavished with its largest inflow since February 2008.
After months with barely any capital moving in or out, the iShares U.S. Broker-Dealers & Securities Exchanges ETF (ticker IAI) added US$211 million on Monday, according to data compiled by Bloomberg. It was the second-best influx since the product launched in 2006, and one of only two inflows of more than US$100 million in well over a decade.
Trading data for the fund -- which follows an index of investment-service providers as well as securities and commodities exchanges -- shows the value of shares changing hands on-exchange was only about US$30 million on Monday. That suggests the cash came from an over-the-counter transaction, meaning it could all be one investor.
IAI invests in a range of well-established Wall Street players including the likes of Nasdaq Inc. and Intercontinental Exchange Inc.
It’s been rallying in recent weeks following strong quarterly earnings from major firms, jumping 25 per cent from this year’s low. That’s trimmed its 2022-to-date loss to about 5.5 per cent, compared with a return of around minus 15 per cent for the S&P 500 Index.
It’s unclear who was behind the flow. Given that IAI sits on losses this year, and the lack of liquidity in the fund, the flow could theoretically be the first half of a tax trade known as a heartbeat. This involves an unusual large inflow followed by a corresponding outflow in the days following.
A spokesperson for BlackRock Inc., issuer of the fund, declined to comment.
Still, IAI shows no obvious history of such trades. Another theory holds that the chaos engulfing crypto following the collapse of digital-asset exchange FTX is burnishing the appeal of old-school Wall Street, according to Todd Rosenbluth, head of research at ETF data provider and research consultant VettaFi.
“The recent downfall within the cryptocurrency markets could spark renewed interest in traditional market trading and provide a boost for investment banks and exchanges,” he said. “IAI provides concentrated exposure to this theme within the financial services sector compared to broader sector-based funds.”
