U.S. investors added $9 billion more to exchange-traded funds than they withdrew in January, marking the fifth consecutive month of positive flows for the sector.
According to monthly data from State Street Global Advisors, U.S. assets in ETFs reached $1 trillion as of the end of the month, up 0.9%, as investors increased their appetite for dividend and large cap funds while selling emerging market stocks, commodities and small-cap stocks.
ETFs are index based open-ended funds that can be bought and sold like ordinary shares on a stock exchange. They can be used both by active traders and buy-and hold investors maintaining an asset allocation.
Assets under management in ETFs alone will reach $2 trillion globally by the end of 2012, according to BlackRock. Along with helpful regulatory changes, ETFs are benefiting from more fund platforms and exchanges, more marketing by online brokers, and more interest among fee-based planners.
In January, State Street reports, large-cap ETFs and fixed income ETFs had inflows of $6.6 and $2.9 billion, respectively. Investors withdrew $4.5 billion from international-emerging ETFs, $2.7 billion from commodities and $1.4 billion from small-caps.
Both the S&P 500 Index and MSCI EAFE Index rose 2.7%. U.S. bonds were relatively unchanged with the Barclays U.S. Treasury Index falling 0.02% and the Barclays U.S. Aggregate Index rising 0.1%. Gold fell 5.6% to $1,327 per ounce, its worst monthly return since July 2010. Emerging Markets also lost ground, falling 2.7%.
Losses in emerging markets were caused by a combination of negative performance and outflows, while the losses in commodities were mostly attributed to gold.
The large-cap gains were driven mainly by inflows to the SPDR S&P 500.
The three biggest ETFs in January were the SPDR S&P 500, SPDR Gold Shares, and Vanguard Emerging Markets.
The three ETFs with the largest dollar volume in trades were the SPDR S&P 500, the iShares Russell 2000 and the PowerShares QQQ.