ETF Inflows Hit a Record $191B in 2012


Inflows to U.S.-listed exchange-traded products reached a record $191 billion last year, topping the previous annual record of $169 billion set in 2008, according to Morningstar data released today. Inflows of $37.7 billion in December helped push the annual total to a new record.

Morningstar noted that in 2008 U.S. equity funds helped lead the way, in 2012 it was international, fixed-income, and sector stock ETFs that were on the receiving end of most of the inflows.

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"Strong flows and market appreciation allowed total assets in U.S. ETFs to hit $1.35 trillion. ETFs now account for 13% of total ETF and mutual fund assets, excluding money market funds," according to Morningstar.

The research firm notes ETF assets have more than doubled since 2008 and assets under management at taxable bond ETFs have surged to $225 billion from $53 billion four years ago.

The SPDR S&P 500 (NYSE:SPY), the oldest U.S.-listed ETF and the world's largest ETF by assets, was the top asset-gatherer last year, hauling $20 billion, the bulk of which came in December, according to Morningstar. PIMCO's Total Return ETF (NYSE:BOND), colloquially known as the Bill Gross ETF, was the most successful new ETF of 2012 as measured by assets. BOND raked in nearly $4 billion in AUM.

At the issuer level, BlackRock's (NYSE:BLK) iShares unit, the world's largest ETF sponsor, topped Vanguard in terms of fund flows for the first time in three years.

"Vanguard, which offers a series of low-priced, portfolio building-block ETFs has consistently gained market share, from 7% five years ago to 18% today. Meanwhile, iShares has seen its market share drop from 53% five years ago to 41% today," according to Morningstar.

While much has been made of the rivalry between iShares and Vanguard, some factors in this tussle often go ignored. Those include the fact that State Street's State Street Global Advisors unit sits in between iShares and Vanguard and has about 24 percent market share.

Additionally, iShares' lineup is more than quadruple the size of Vanguard's and the former offers ETFs across several market segments, including commodities and country-specific international funds, that Vanguard does not currently compete in.

Morningstar data indicate iShares, SSgA and Vanguard combine to control about 74 percent of the U.S. ETF market. Invesco's PowerShares (NYSE:IVZ) sits in the fourth spot followed by Van Eck's Market Vectors unit and WisdomTree (NASDAQ:WETF).

After SPY, the iShares MSCI Emerging Markets Index Fund (NYSE:EEM) was the second-best ETF in terms of 2012 inflows, followed by the rival Vanguard MSCI Emerging Markets ETF (NYSE:VWO). EEM hauled in $10.5 billion while VWO attracted just over $10 billion. Rounding out the top-five was the iShares iBoxx $ Investment Grade Corporate Bond Fund (NYSE:LQD) and the SPDR Gold Shares (NYSE:GLD). GLD is the second-largest ETF in the world by assets behind SPY.

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