January ETF Flows: Hot Start To 2011

by on February 4, 2011 | ETFs Mentioned:

In 2010 the ETF industry stumbled coming out of the gate, as more than $17 billion flowed out of exchange-traded products in the first month of the year. This year’s January figures showed an opposite result, as the latest data released by the National Stock Exchange shows that U.S.-listed ETPs took in more than $10 billion last month. The industry finished the month with $1.02 trillion in assets, an increase of about 1% over the prior month.

Reversing the trend of recent years, money flowed into domestic equity funds (inflows of almost $10 billion) and out of international stock ETFs (outflows of $1.3 billion) in January. Commodity ETFs also bled assets as investors fled physically-backed gold products, while fixed income funds saw big inflows [see Are Bond ETFs Broken?].

After taking in more than $40 billion in 2010, Vanguard picked up where it left off in 2011 by leading all issuers with $4.2 billion in inflows. Not far behind was PowerShares, which surged higher thanks to big inflows into its flagship QQQQ (the fund raked in $2.5 billion of the firm’s total $3.2 billion during the month). iShares saw its market share drop under 44% after monthly outflows totaled more than $3 billion. First Trust continued an impressive run with nearly $500 million in January inflows. The firm’s ETF assets are up nearly 200% since last January, and market share has doubled over that period.

After losing more than $16 billion in January 2010, SPY saw solid inflows of $1.5 billion last month to inch up to more than $93 billion in total. Meanwhile, the second largest ETF continued to bleed assets, as $2.3 billion flowed out of GLD. The physically-backed gold SPDR has now experienced four consecutive months of outflows. And GLD continued to lose ground to its iShares competitor; the COMEX Gold Trust (IAU) also saw outflows, but of only about $300 million. iShares cut the expense ratio on IAU to 25 basis points last summer, and the fund has been gaining ground on its much larger rival ever since [also read Free ETF Trading, Comparing All The Options].

VWO Tops EEM

In another closely-watched head-to-head battle, Vanguard finally gained the upper hand in the emerging markets ETF space. VWO surpassed iShares EEM in terms of total assets for the first time; both funds track the MSCI Emerging Markets Index but VWO has a clear edge in expenses (27 basis points compared to 69 bps for EEM). VWO, now the third largest U.S.-listed ETF, took in $1.7 billion while EEM bled nearly $7 billion [see Investors Are Embracing Cost Conscious ETFs...Or Are They?].

In addition to GLD and EEM, other funds experiencing major outflows included the Russell 2000 Index Fund (IWM, $1.9 billion) and Vanguard’s MSCI Total Market ETF (VTI, $818 billion). Five ETFs took in at least $1 billion last month, including SPY, QQQQ, VWO, the iShares MSCI Brazil Index Fund (EWZ) and Dow Jones Industrial Average ETF (DIA).

Several of the newer additions to the ETF lineup appear to be gaining considerable traction. Vanguard’s S&P 500 ETF (VOO) took in about $360 million, or nearly 150% of December assets. Also posting a big relative gain was WisdomTree’s Commodity Currency ETF (CCX), which raked in $91 million to push total AUM to $116 million [see Using A Currency ETF To Play Commodities].

Though the ETF industry remains top-heavy, the smaller and more targeted products out there continue to gain ground. In aggregate, the 20 largest exchange-traded products account for about 47% of total assets, but these same 20 behemoths saw outflows of about $3 billion last month.

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Disclosure: No positions at time of writing.