The ETF industry finished 2011 with assets of about $1.06 trillion according to data recently released by the ETF Industry Association. Total assets grew by about 5% over the previous year, when the industry stood at $1.01 trillion. Net cash inflows for the year totaled about $117.6 billion, a slight decrease from 2010 when the industry took in $118.7 billion. In 2009, total ETF inflows tallied about $119.4 billion, meaning that creations have been remarkably consistent over the last three years. December was one of the best months of the year from a cash inflows perspective; approximately $16.2 billion, or about 14% of the annual total, came in during the final month of the year.
U.S. equity ETFs accounted for about $41.3 billion in inflows, or approximately 35% of the industry total. But the real growth came in the fixed income arena; bond ETF assets grew from about $129 billion last year to nearly $180 billion at the end of 2011. That means bond ETF assets grew by about 38% last year, far outpacing the overall industry growth and dwarfing the 7% growth in domestic equity ETF assets. Bond ETFs saw net inflows last year of about $45 billion, representing about 38% of the industry’s total [for more ETF insights, sign up for the free ETFdb newsletter].
Commodity ETPs saw net outflows of nearly $2.6 billion in December, which pushed the 2011 total into negative territory. The December dropoff was attributable primarily to the Gold SPDR (GLD), which saw $2.2 billion go out the door in December. That ETF finished 2011 with $63.5 billion, making it the second largest ETF behind the S&P 500 SPDR (SPY finished with about $95.4 billion). GLD briefly surpassed SPY during 2011 to claim the title of World’s Largest ETF, but as interest in gold waned so too did the fund’s asset base. Vanguard’s MSCI Emerging Markets ETF (VWO) claimed the third spot (it was the fourth largest ETF last year) while the iShares MSCI EAFE Index Fund (EFA) and MSCI Emerging Markets Index Fund (EEM) rounded out the top five. Of the 21 largest ETFs by assets at the end of 2011, 14 belong to the iShares family.
Though Vanguard closed out last year on a down note–the company saw net outflows during December–2011 was a period of explosive growth for the Pennsylvania-based firm. The low cost provider led all issuers with almost $36 billion in inflows in 2011, easily beating out iShares ($29.8 billion) and State Street ($17.2 billion). ProShares also had a strong year, raking in about $6.4 billion in new money. Direxion, the other large provider of leveraged and inverse ETFs, took in about $3.5 billion last year–indicating that investor appetite for products that offer amplified exposure remains strong.
Despite the surge in assets last year, Vanguard continues to trail both iShares and State Street by a wide margin. iShares, with nearly $450 billion in ETF assets, accounts for about 42% of the industry total. State Street’s $266.5 billion–most of which is attributable to SPY and GLD–translates into market share of about 25%, while Vanguard’s $170 billion in assets represents about 16% of the industry. The company has grown by leaps and bounds over the last several year; market share is up sharply from about 11.5% in 2009 and 14.7% in 2010.
At the end of 2011 the “big four” of the U.S. ETF industry–iShares, State Street, Vanguard, and PowerShares–accounted for nearly 88% of total assets. Yet last year was a period of strong growth for a number of smaller issuers as well. WisdomTree, the firm behind several dividend-weighted ETFs and a number of international bond products, saw assets climb by more than 23% in 2011. Schwab’s ETF assets nearly doubled, as the late entrant to the ETF industry continues to thrive thanks to a cost efficient product lineup. And ALPS, which offers only four ETFs, saw assets grow from less than $800 million in 2010 to more than $2.1 billion at the end of 2011.
ETF Winners And Losers
Last year was generally a period of strong growth for the biggest ETFs in the industry; of the 23 largest exchange-traded products, only three saw net outflows in 2011: GLD, the iShares Emerging Markets Index Fund (EEM), and the iShares Russell 2000 Index Fund (IWM). Four ETFs saw more than $5 billion in new cash in 2011, including SPY, the Vanguard MSCI Emerging Markets ETF (VWO), the iShares MSCI EAFE Index Fund (EFA), and the Vanguard Total Bond Market ETF (BND).
Other ETFs experiencing noteworthy inflows in 2011 highlight some trends among investors during the last year. Vanguard’s Dividend Appreciation ETF (VIG) took in about $4.1 billion, representing almost 90% of assets in the fund at the end of 2010. Dividend-focused products have been in high demand in recent months, as investors seek out tools to boost the current return on their portfolio and scale back risk as well. The Market Vectors Agribusiness ETF (MOO) saw inflows of about $3.7 billion in last year, more than the $2.6 billion in AUM at the end of 2010. Many investors have embraced “indirect” exposure to commodities through the stocks of companies engaged in the extraction and production of raw materials–including many of the ETFs in the Commodity Producers Equities ETFdb Category.
Two head-to-head battles of popular ETFs saw big swings in 2011. The two ETFs linked to the MSCI Emerging Markets Index–iShares’ EEM and Vanguard’s VWO–experienced wildly different fates last year; VWO took in about $7.8 billion in inflows, while EEM saw outflows of almost $6.8 billion. Another iShares ETF, the COMEX Gold Trust (IAU) was on the winning end of its battle with a more established and more expensive competitor. IAU, which holds gold bullion, took in about $2.7 billion in new cash. The Gold SPDR (GLD), which also offers physically-backed exposure to gold–saw outflows on the year of more than $300 million. IAU charges just 0.25%, while GLD has an expense ratio of 0.40%.
The total number of u.S.-listed ETPs stood at 1,369 at the end of 2011–up about 25% from last year. Of that total, 495, or about 38%, had assets of more than $100 million. Last year, 501 ETPs (46% of the total) had assets of more than $100 million.
Disclosure: No positions at time of writing.