The Markets February 12, 2010

ETFs Didn't Fare Well in January

Following strong inflows in 2009, U.S. exchange-traded-fund (ETF) flows dipped into the red to kick off 2010, with $16.7 billion in net outflows in January, according to estimates from Morningstar, Inc.
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Although industry assets fell to $746.9 billion, a 4.8% decline from December, total net assets for ETFs grew 49.2% on a year-over-year basis, Morningstar said in a press release.

SPDRs SPY had more than $15.1 billion in outflows in January. Morningstar noted that its massive size and heavy trading activity tends to skew ETF flow data.

International-stock ETFs took in $888.2 million in net assets in January, led by Vanguard Emerging Markets VWO, which saw $894 million in net inflows. Over the past year, Vanguard’s ETF assets have more than doubled, and the firm’s ETF market share has grown to about 12.4% from 8.5% a year ago, Morningstar said.

iShares Barclays TIPS Bond TIP had inflows of $674.1 million in January, as investors poured more than $1.9 billion into taxable-bond ETFs.

Morningstar’s report about January ETF activity is available at www.global.morningstar.com/janflows10.

The Markets February 12, 2010

Domestic Stock Funds Reverse Flow in January

Mutual funds saw inflows of $44.5 billion in January, according to estimates from Morningstar, Inc.
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Domestic stock funds gathered $2.7 billion in assets, reversing four consecutive months of outflows, while international equity funds took in more than $8.1 billion—the biggest monthly inflow for the asset class since December 2007, according to a press release.

Meanwhile, bond funds continued to dominate all other asset classes, with investors adding $28 billion to fixed income funds during the month. Based on total net assets, fixed-income funds now represent approximately 30% of the mutual fund market, up from 19% at the end of 2007, Morningstar said. 

Although active funds still dominate the mutual fund market, passive strategies have increased their market share to 20%, up from 11% at the beginning of 2000.

Despite significant outflows from several Fidelity large-cap funds in January, the firm registered net inflows of nearly $1.6 billion. With inflows of nearly $16.2 billion in 2009, Fidelity has not come close to making up 2008’s outflow of $37.3 billion, Morningstar noted.

American Funds experienced outflows for the seventh straight month, but the pace of the firm’s outflows has slowed, and Davis Funds and Selected Funds, both run by Davis Advisors, saw outflows again last month. Ivy Funds had a strong month, paced by $709.2 million in inflows to Ivy Asset Strategy.

Morningstar’s report about mutual funds activity in January can is available at www.global.morningstar.com/janflows10.

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