After a sluggish start to the year, the ETF industry picked up the pace in March, as strong performances from global equity markets and a wave of fresh cash inflows sent industry asset levels soaring. According to data compiled by IndexUniverse.com, total ETF assets stood at nearly $821 billion at the end of March, and total inflows for the month exceeded $20 billion. That brings total 2010 cash flows back into the black, after huge outflows in January (the majority of them attributable to SPY) put the industry in an early hole.
The biggest gains on the month came from iShares and State Street (which saw inflows of $5.3 billion and $8.3 billion, respectively), but March was a good month all around for the ETF industry. The relatively small $220 million in outflows from United States Commodity Funds was the biggest slide, and all but six issuers reported net cash inflows for the month. First Trust took in $458 million that was spread relatively evenly across a few dozen funds. Barclays iPath raked in $677 million, with VXZ and VXX accounting for the lion’s share of monthly inflows. And Rydex enjoyed one of its best months in recent memory, taking in almost $450 million ($300 million of which was attributable to RSP).
ETFs In Focus
A few fund-specific numbers from March are noteworthy. Vanguard’s Emerging Markets ETF (VWO) continues to gain ground on the competing iShares fund. VWO took in about $774 million last month, while the iShares MSCI Emerging Markets Index Fund (EEM) saw almost $700 million in outflows (bringing the first quarter total to $4.4 billion). VWO’s total assets now stand at nearly $23 billion, still well behind the $35 billion in EEM. But that gap has closed considerably over the last year, as investors seeking emerging markets exposure have gravitated towards the low cost VWO (see Five Differences Between EEM and VWO).
The United States Natural Gas Fund (UNG) has also had an interesting first quarter. During the natural gas craze of 2009, investors flocked towards this fund as a way to gain exposure to the “fuel of the future.” The fund saw cash inflows of more than $5 billion on the year, less than only three other exchange-traded products. But the tables have turned in 2010. UNG recorded its second consecutive month of cash outflows in March (after January was cash flow neutral), as about $24 million left the fund. This trend, coupled with the abysmal year-to-date performance of natural gas (see How UNG Lost 20% in March), has taken a reservoir-sized chunk out of the fund’s AUM. UNG finished March with assets of about $2.8 billion, or almost 34% less than the year-end 2009 tally. That dip could make a major impact on the financial health of U.S. Commodity Funds; with an expense ratio of 0.96%, the drop in assets translates into a hit to annual revenue of almost $17 million.
See a more complete rundown of the March data release here.
Disclosure: No positions at time of writing.