The Markets January 12, 2011

U.S. ETF Assets Cross $1T Mark

At the end of December, U.S. ETF assets stood at $1.005 trillion – the first time U.S. ETF assets surpassed $1 trillion.
Reported by

Strategic Insight, an Asset International company, estimates that investors poured an additional $16 billion into U.S. exchange-traded funds (ETFs) in December 2010.   

Flows were driven by equity ETFs, while bond ETFs (with the exception of high-yield bond ETFs) saw net outflows, according to a press release. December’s inflows marked a rise from the $7 billion in net inflows that U.S. ETFs enjoyed in November.   

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December also capped another strong year for ETFs, as full-year inflows to U.S. ETFs totaled $109 billion – the fourth straight year that net inflows to ETFs topped $100 billion.  

“January often features net outflows from U.S. ETFs because of tax maneuvers and investors’ portfolio rebalancing, but U.S. ETF assets should hold at $1 trillion in February and continue their march toward $2 trillion,” said Loren Fox, senior research analyst at Strategic Insight, in a press release. “In 2011, we expect more news in the non-traditional ETF front, including more demand for ‘alternative’ ETFs, and more launches of actively managed ETFs.”
The Markets January 12, 2011

2010 End Indicates Tide Shift for Mutual Funds

Demand among U.S. investors for stock mutual funds accelerated by year end, with aggregate inflows to equity funds, including ETFs, near $25 billion, according to Strategic Insight, an Asset International company.
Reported by

After attracting $1 trillion globally since the beginning of 2009, December marked a turning point – albeit temporary – for bond funds. In contrast to stock funds, rising interest rates, NAV declines, and year-end rebalancing triggered a spike of bond fund redemptions. December witnessed an estimated $26 billion of net outflows among all bond funds (including ETFs), the largest dollar amount since the peak of the financial crisis in October 2008. Nevertheless, global bond funds, floating rate funds, and high yield funds were a few investment areas with positive inflows.   

“Because many investors engage in year-end portfolio adjustments and tax-related moves, December is a difficult month from which to draw firm conclusions. However, it is clear that stock investor sentiment is slowly improving,” said Avi Nachmany, Strategic Insight’s Director of Research, in a press release.  

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Not including ETFs, international and global funds in December garnered net inflows of $14 billion, while domestic equity mutual funds saw net outflows of $9.5 billion. December was the seventh straight month that international and global equity funds saw positive flows.  

December’s bond-fund outflows included roughly $10 billion in outflows from taxable bond funds, although global bond funds saw net inflows in December due to investors’ increasing interest in global diversification. Also, high-yield bond funds saw inflows in December, which was a sign of an increasing appetite for risk among some investors – and in many ways an extension of improving equity sentiment. Muni bond funds saw net outflows of $13 billion in December, driven by a flood of supply (spurred by Build America Bonds) and worries about state and municipal government balance sheets.  

For the full-year 2010, long-term mutual funds attracted net inflows of $245 billion (not counting additional inflows to ETF and VA funds). That included $222 billion in net inflows to bond mutual funds – the second-largest flow numbers to bond funds ever, after 2009’s record inflows of $350 billion – and $23 billion in net inflows to equity funds, up from $14 billion in 2009 inflows to equity funds, the press release said.  

Money-market funds saw net outflows of $6.5 billion in December, a decline from the $25.1 billion in net inflows they saw in November.

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