Investors added $117.6 billion to their holdings in exchange-traded funds in 2011. That is almost identical to 2010, when they added $118.7 billion, and 2009, when they added $119.4 billion. But the value of their holdings only increased $51.4 billion, because the value of their shares fell, according to the Exchange Traded Fund Association.
By year’s end, the overall value of those holdings reached $1,060.2 billion, up from $1,008.7 billion, according to statistics compiled by the ETF Association and released Thursday morning.
That represented growth in value of 5.1% for the year, a far cry from prior years. In 2010, the value of assets grew 27.5% due to additions and appreciation, from $790.9 billion in 2009. In 2009, assets grew 46.7%, from $539.0 billion.
By comparison, $11.6 trillion was invested in mutual funds, according to end of November statistics from the Investment Company Institute. That was down from $11.8 trillion at the end of December 2010. But at the end of 2000, only $66 billion was invested in ETFs, according to the ICI.
In the newly released numbers, which come out about a month ahead of ICI’s count, the two categories of exchange-traded funds where inflows beat last year’s 27.5% growth figure were fixed-income funds and currency funds.
The big gainer was the fixed-income category, which grew 34.6% to $184.0 billion, from $136.7 billion. The other category, currency, is much smaller. Currency funds grew 31.4% to $7.9 billion.
"The bottom line is that investors want the safety of a portion of their income,’’ said Brian Brennan, vice president at T. Rowe Price.
That meant Treasury bond funds, even though Standard & Poor’s downgraded its rating on U.S. government obligations at the outset of August, for the first time ever. (See “ETFS Bond With Treasuries, in 2011," MME Jan. 4, 2011).
“Even though the Treasury market was downgraded by S&P, it still shows that its safe haven status continues," Brennan said.
Investors reduced their allocation to riskier assets, such as stocks, Brennan said, “and decided, instead of not being in money markets yielding close to zero or zero, they'd rather be in something with a little more yield that was safe."
Even over the long haul, Treasury bond funds are outperforming stock indices, he noted. Exchange-traded funds tracking the Barclays Capital 20-year U.S. Treasury Index have gained 8.6% a year over the last 11 years, Brennan said. By comparison, the Standard & Poor’s 500 has gained 1.48% a year since 2000.
Even the “dogs of the Dow” are doing better than stocks in general, he noted. "The dogs of the Dow did very well last year, " he said.
The “dogs” are the 10 stocks in the Dow Jones Industrial Average that pay the highest dividends. The basket is refreshed at the start of each year. In 2011, the “dogs of the Dow” gained 12.2%, according to Canaccord Genuity, an institutional broker.
"The big theme for 2012 is the hunt for income and anything that is not correlated to the macro moves that everybody has been expecting,’’ said Greg King, director and head of exchange-traded products for Credit Suisse. “And I am not sure anyone knows quite what the answers are."
Separately, Russell Indexes said Wednesday that its large-cap Russell 1000 Index finished up 1.5%, in 2011, while its small-cap Russell 2000 Index finished down 4.5%.
The large-cap sectors with the best returns: Consumer staples, up 14.5% , and utilities, up 12.6%. Financial services fell 12.9%.
The leaders in the small-cap index were: Utilities, up 10.5%, and consumer staples, up 5.0%. The biggest drop came in materials and processing, down 9.0%.