Investors flock to defensives despite market rally

Defensive exchange traded funds (ETFs) have seen an ‘unusually large’ volume of inflows in the past week, according to ETF Securities, suggesting investors are distrustful of the market.

In the ETF provider’s latest fund flows data, it said total inflows for the week to 01 April were $371 million and over half of the top 10 largest inflows went into bond ETFs.

This included BetaShares Australian Investment Grade Bond ETF, BetaShares Active Australian Hybrids ETF and BetaShares Australian Government Bond ETF.

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It also included defensive areas such as gold, ETFS Physical Gold, or those which shorted the market such as BetaShares Australian Equities Strong Bear fund.

“The flows suggested investors do not fully trust the stockmarket rally,” the report said.

The ASX 200 had risen 7.3% over the past month and was one of the best-performing global markets currently.

ETFs investing in commodities were the poorest-performing sector over the week with BetaShares Crude Oil Index ETF, ETFS Physical Palladium and ETFS Physical Silver all in the bottom three as a result of the impact of Russian sanctions and falling oil price.

Meanwhile, ETFS S&P Biotech ETF was the best-performing fund over the period with returns of 4.5%. The fund offered investors exposure to US healthcare biotechnology companies engaged in research and development of products based on genetic analysis and engineering.

However, the firm noted that while biotech had been the top-performing sector during the week, it had a poor period over the last 12 months.

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