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Data shows that an iShares ETF, which is focused on governance, environmental, and social issues, earned $3.9bn in a single day at the start of last week.
On March 21, 2011, the day following the sale, the assets under management for the iShares ESG Aware MSCI USA ETF ESGU (ESGU), were $14.4bn.
The iShares MSCI USA Quality Factor (QUAL), which added $4.8bn net inflows on March 20th, helped assets increase to $25bn by March 21st.
The ESG ETF redemptions represent a dramatic drop in flows. According to Morningstar Direct data, overall net outflows for the fund were $1.6bn during the year ending February 28, 2008.
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It's definitely an eye-popping figure. Ryan Jackson, Morningstar's managing research analyst for passive strategies, said that it's something they don't often see.
According to Nate Geraci (President of the ETF Store), redemptions could have been caused by BlackRock's rebalancing of its model portfolios.
BlackRock has more than 150 portfolios of models, as its website shows. According to Morningstar Direct, ESGU is represented in more than 20 BlackRock model portfolios.
A spokesperson for BlackRock stated that ETFs within BlackRock model portfolios are subject to inflows and outflows because of the way they actively manage their models to capitalize on market opportunities.
The spokesperson refused to comment on trades or the nature of flows.
On March 17, 43mn shares of ESGU traded, and 11mn were traded on March 20, according to Yahoo Finance data.
Todd Rosenbluth (head of research at VettaFi) stated that the volume of trade could indicate a strategic draw away from ETFs.
He also noted that it is possible for large institutional investors to shift their assets from ESGU into QUAL in order to gain large-cap US equity exposure.
Rosenbluth stated that while companies with strong ESG attributes are often financially strong, the factor ETF will give more specific exposure, which could prove helpful in light of persistent market changes.
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Elisabeth Kashner from FactSet, global fund analytics director, suggested that the swap could also be indicative of a 'waning interest' in ESG products in favor of defensive strategic beta.
BlackRock's ESG investing strategies have also been subject to significant criticism from Republican states in the last year.
Morningstar data shows that ETFs and sustainable mutual funds grew by $3.1 billion in 2022, compared to their record of $67.4bn a year earlier, but still surpassed the record high of $67.4bn in 2018.
Geraci stated that ESG ETF inflows have declined over the past year because of a combination of political backlash, underperformance and investors questioning the merits of such an approach. It's possible that BlackRock was receiving questions about the inclusion of ESG ETFs into their models, and decided to end the bait.
ESG Aware ETF funds invest in large- and medium-cap US stocks. However, the prospectus indicates that there is a bias towards stocks with favorable ESG ratings. MSCI USA Quality Factor ETF invests in large and mid-cap companies that have positive fundamentals.