December 8, 2011

ETF Flows Diminish, but Stay Positive: Morningstar Report

Outflows hit iShares hard, while State Street Global Advisors took in $3.2 billion

U.S. ETF inflows in November fell to $4.7 billion from $20.3 billion in October, Morningstar reported Thursday, and ETF assets dropped by 1.5% to end November with just over $1 trillion. Still, ETF assets under management have grown about 12% from the same period last year, says Morningstar, noting that the U.S. ETF industry hasn't seen a net outflow in six months.

As for the major ETF groups, iShares “fell victim to the largest monthly outflow of any provider, shedding $1.3 billion in aggregate,” said Morningstar ETF analyst Abraham S.H. Bailin in the report. “Despite the outflow, iShares’ market share remains a healthy 41.83% of all ETF assets.”

The largest inflows last month went to State Street Global Advisors, or SSGA, which took in $3.2 billion, mainly in its gold offering (GLD). Vanguard trailed SSGA, gathering nearly $2 billion in new assets last month, the Chicago-based research firm reported.

U.S. Back in the Red

U.S.-stock ETFs lost $5.3 billion in September, but saw a “stellar rebound [in October], as the asset class collected nearly $11 billion,” explained Bailin. “November, however, put the category back in the red, as $2.3 billion exited the asset class.

Outflows from the iShares Russell 2000 Index (IWM) and iShares S&P 500 Index (IVV) totaled $3.2 billion and $1.6 billion, respectively, in November. They were followed by the Financial Select Sector SPDR (XLF), Industrial Select Sector SPDR (XLU) and the SPDR Dow Jones Industrial Average (DIA), which each lost an average of about $550 million.

The SPDR S&P 500 (SPY), the largest ETF on the market, gathered roughly $1.5 billion in November. Other popular ETFs were the Vanguard Dividend Appreciation (VIG), SPDR S&P Dividend ETF (SDY) and iShares Dow Jones Select Dividend (DVY).

International ETF Flows

International-stock ETFs lost $1.8 billion in November after experiencing October inflows of $5.2 million. The Vanguard MSCI Emerging Markets ETF (VWO) had outflows of $547 billion, while the iShares MSCI EAFE Index (EFA) lost $451 million.

The iShares MSCI Emerging Markets Index (EEM), however, collected just under $150 million in November after seeing inflows of $3.5 billion in October.

Gold Flows

U.S commodities ETFs collected roughly $3 billion in November, Morningstar says, driven by two offerings in particular: The SPDR Gold Shares GLD gathered a whopping $3.1 billion, and the iShares Gold Trust (IAU) picked up $366 million last month.

Other commodity-focused ETFs–like PowerShares DB Agriculture (DBA)–saw outflows of about $100 million each.

Taxable Bonds

Year to date, the taxable-bond asset class has seen the largest share of ETF inflows, and in November had inflows of $5.2 billion–topping other asset classes.

Vanguard Total Bond Market ETF (BND), iShares Barclays Tips Bond (TIP) and iShares iBoxx $ Investment Grade Corporate Bond (LQD) gained $1 billion, $819 million and $693 million, respectively.

Outflows that did occur involved ETFs with longer durations and lower ratings Morningstar reported. The iShares Barclays 20+ Year Treasury Bond (TLT), for instance, bled $537 million.

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