Total assets in U.S. exchange-traded funds fell 5.8%, or $45 billion, in January from a month earlier, according to monthly data from State Street Corp. [STT]
That brought ETF assets in the U.S. down to $730 billion. In December, global ETF assets hit the coveted $1 trillion milestone. The drop in U.S. assets was mostly in line with the market’s disappointing performance in January, as the S&P 500 fell 3.6% and the MSCI EAFE Index lost 4.4%.
Assets in fixed-income ETFs, however, rose 3.2%, or $3.2 billion, last month, continuing the trend that began last year in the sector. Fixed income, most notably TIPS, or Treasury Inflation-Protected Securities, and one- to three-year bonds, led the asset surge into ETFs last year, taking in more than $200 billion through the first 11 months of 2009.
In fact, 2009 was an all-around great year for ETFs. Global ETF assets
At the end of last year, however, Dan Dolan, director of wealth management strategies at State Street's Select Sector SPDRs,
“The need for income is thriving,” he said. “It will be interesting to see, as yields dry up, what investors will add to their portfolios to find that income somewhere else.”
Dolan predicted investors to turn to high-yielding equities in 2010. But right now, fixed income is still leading the pack.