Gold ETFs Lose Luster With Advisors as Fixed Income Funds Climb: Schwab

Top 10% of RIAs have most ETF assets in U.S. and international equity; smaller firms favor U.S. fixed income

Independent advisors’ appetite for U.S. fixed income exchange-traded funds captured 54% of ETF inflows in 2011, and U.S. equity ETFs saw 33% of flows, but funds tracking international equities and commodities–and gold in particular–lost favor, says a new report released Monday by Charles Schwab.

The top 10% of registered investment advisors (RIAs) by assets under management have the bulk of their ETF assets in U.S. and international equity funds, at 62%, while smaller firms use U.S. fixed income ETFs 50% more than their larger peers, Schwab reported.

Strikingly, the report also shows that RIAs’ appetite for exchange-traded funds grew in 2011 as the overall market’s interest in ETFs declined.

RIAs held $60 billion in ETF assets at Schwab as of Nov. 30, up 5% from the end of 2010, and ETF trade volume among advisors was up 26%. This compares to Schwab’s overall cash inflows to ETFs through November, which declined from 2010, with eurozone jitters likely driving withdrawals from international equity funds, according to Schwab.

Alternative funds saw inflows decline in 2011 from 2010 due to independent advisors’ lower risk appetite, according to Schwab. ETF alternatives assets fell to 15% of flows in 2011 versus 24% in 2010.

 “Independent advisors kept their taste for pure beta ETFs as they gravitated towards ETFs that track ‘core’ asset classes such as U.S. stocks, international companies and domestic fixed income. These classes are represented by some of the oldest and largest ETFs tracking indices like the Dow Jones Industrial Index and S&P 500,” said Schwab in its report, “2012 ETF Outlook for Advisors.”

The full report will be available to advisors attending the ETF Virtual Summit on Tuesday. The summit is an online conference held by ETF Trends and RIA Database, with Schwab ETFs as a sponsor along with iShares, State Street’s SPDR, ProShares, Vanguard, S&P Indices and many others in the ETF universe.

Read more about the ETF Virtual Summit at AdvisorOne.com


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