Communication Services Continues Rapid Growth Pace

There is no denying the Communication Services Select Sector SPDR XLC was one of last year's most successful new exchange traded funds.

XLC's rapid pace of adding new assets is continuing early in 2019.

What Happened

XLC, which debuted in June 2018, was the first ETF created to reflect changes in what was previously known as the telecommunications sector. Following the changes that became official in September 2018, the sector is now known as communication services.

Gone are the days of a sector and its related ETFs being dominated by AT&T Co. T and Verizon Communications Inc. VZ. While those traditional telecom giants remain in the communication services sector, the group was refreshed to include companies that previously resided in the consumer discretionary and technology sectors, giving it more of a growth feel.

Why It's Important

“This was the largest sector change to occur since the GICS itself was developed back in 1999, the launch of XLC was perfectly timed for ETF investors whom were looking for optimal exposure in this new look world going forward in the Communications sector,” said Paul Weisbruch, head of ETF sales and trading at Dallas-based Esposito Securities, in a note out Wednesday.

As Weisbruch notes, XLC is continuing its torrid asset-gathering pace. Year-to-date, investors have added $842.65 million in capital to the fund, taking its assets under management tally to $3.79 billion as of Jan. 22.

“Three-month trailing average daily volume in the product was already a robust 3.5 million shares but this number has been creeping higher thanks to the recent demand for the product amid recent inflows, pushing the one-month trailing average daily number above the 4.2 million share mark,” said Weisbruch.

What's Next

Today, XLC allocates over 40 percent of its combined weight to shares of Facebook Inc. FB and the two classes of Alphabet Inc. GOOG stock. With Facebook due to report earnings Jan. 30 and Alphabet slated to step into the earnings confessional Feb. 4, XLC could continue seeing an uptick in activity and flows over the near-term. The ETF is up 6.69 percent year-to-date.

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