Big Tech Is About To See A Massive Outflow – Where Will This Money Go? – Forbes

As it chases the hottest Wall Street phenomena of embracing value stocks against tech, one $16 billion exchange-traded fund is getting a major revamp this week.

As per Wells Fargo WFC , theiSharesMSCI USA Momentum Factor ETF (MTUM) MTUM ofBlackRock BLK will witness a whopping 68% of its assets shift, in order to retain the market's best performers over the last year.

NEW YORK, NEW YORK - MAY 11: People visit the Charging Bull statue in Wall Street on May 11, 2021 in ... [+] New York City. New York Governor Andrew Cuomo announced pandemic restrictions to be lifted on May 19. (Photo by Noam Galai/Getty Images)

Stocks markets across the globe have been very volatile and unpredictable since the onset of the coronavirus pandemic making it necessary for investors and funds to question their conventional strategies.

During the month of April, inflation increased at a faster pace and the growth of new jobs was slow. Early jobs data for the month of May also indicates sluggish hiring. The jobs number expected for May is 488,000. Although this would be a good figure in normal circumstances,itis only half of what the authorities had targeted.

However, with the implementation of a successful vaccination campaign, the United Statesis on theright track to recovery. According to theWorldometerswebsite, there have been 33,947,189 cases and 605,208 deaths as of May 26. According to the CDC, approximately 39.5% of the American population has been fully vaccinated, and 49.5% have received at least one dose.Considering this recovery, funds are also readjusting their portfolios to capitalize on changing market dynamics.

MTUM belongs to a category of ETFs known as smart-beta funds witha $1.4 trillion marketwhich chooses securities based on sound quantifiable research. The ETF rates stocks based on their six-month and one-year performanceandrebalances every 6 months.As a result, it has held on to thepoorly performing technology mega-caps far longer than its peers.

With companies like Netflix NFLX and Apple AAPL struggling this year, the ETF is on track to trail the larger U.S. economy for the third quarter in a row, which will be itsworst streak since its introduction in 2013. Value stocks, on the other hand, haveperformed exceptionally well since November last year.The fund's adjustment, expected on Thursday, would increase the weightage of financial shares from nearly 2% to a third of its portfolio. Likewise, from a high of 40%, its exposure to Big Tech would drop to 17%.This would help the fund to regainits flair,assuming the approach remains effective.MTUM isn't the only onemaking a switch.

At the end of May, iShares' 5 major factor ETFs momentum, valuation, quality, size, and minimum volatility will all rebalance.It is widely anticipated, the sector-neutral value ETF may also observesome major shifts.

Oneof the most popular quant strategies of the decade is set to undergo a major overhaul, threatening to create new uncertainties in a financial market still reeling from the turbulence inBigTech stocks.Only time will tell whether the decision made byBlackRockexperts to decrease exposure to Big Tech is correct, at a time when Big Tech, more recently, is performing much better and pushing theNasdaq NDAQ up.

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Big Tech Is About To See A Massive Outflow - Where Will This Money Go? - Forbes