Investors took on risk in February, plowing new money into emerging markets and junk bonds.
Investors poured money into relatively risky emerging markets in February, making the world’s two biggest developing-markets ETFs the most popular funds. Overall, inflows totaled $13.8 billion and, including the market’s gains, total assets rose to over $1.201 trillion—4.4 percent more than a month earlier and 13.7 percent above February 2011.
While total inflows were about half of last month’s $28 billion blowout, it’s clear in the numbers that investors were taking on a lot more risk, as emerging markets are much more volatile than developed markets. Almost $5.4 billion flowed into international equities in February, compared with just $142.7 million of net inflows into U.S. equities.
Moreover, $4.15 billion flowed into U.S. fixed-income ETFs last month, with nearly half of that figure coming from the ETF market’s two biggest junk bond funds, according to data compiled by IndexUniverse. That move into junk was another sign of growing investor boldness, as high-yield debt often rallies as equity markets build up a bullish head of steam.
The Vanguard MSCI Emerging Markets ETF (NYSEArca: VWO) was the most-popular exchange-traded fund last month, gathering $2.46 billion in new assets, making it the top fund two months in a row. Riding the success of VWO, Vanguard hauled in $5.64 billion last month, more than any other ETF company. It’s still No. 3 behind iShares and State Street Global Advisors, but it’s slowly bridging the gap.
Lest last month’s flows report suggests the world economy is finally putting the economic turmoil of the past few years in the rearview mirror, the world’s biggest physical gold ETF (NYSEArca: GLD) was the No. 3 fund on our “Top Gainers” list, suggesting investors are still plenty worried about what lies ahead, even if debt-gorged Greece is on the verge of receiving a second bailout.
| Top Gainers ($, Millions) | |||||
| Ticker | Name | Issuer | February 2012 Flows | February 2012 AUM ($, M) | February 2012 Turnover |
| VWO | Vanguard MSCI Emerging Markets | Vanguard | 2,458.93 | 55,083.40 | 21,651.00 |
| EEM | iShares MSCI Emerging Markets | BlackRock | 1,447.68 | 41,056.79 | 47,402.90 |
| GLD | SPDR Gold | SSgA | 1,297.08 | 73,592.21 | 45,226.20 |
| JNK | SPDR Barclays Capital High Yield Bond | SSgA | 1,137.53 | 11,930.80 | 4,319.13 |
| VXX | iPath S&P 500 VIX Short-Term Futures ETN | Barclays Capital | 907.62 | 1,660.39 | 17,250.56 |
| HYG | iShares iBoxx $ High Yield Corporate Bond | BlackRock | 813.11 | 14,258.76 | 5,072.14 |
| LQD | iShares iBoxx $ Investment Grade Corporate Bond | BlackRock | 809.39 | 19,563.38 | 4,645.63 |
| VCIT | Vanguard Intermediate-Term Corporate Bond | Vanguard | 552.26 | 1,747.41 | 851.88 |
| DEM | WisdomTree Emerging Markets Equity Income | WisdomTree | 477.13 | 3,330.46 | 936.98 |
| VNQ | Vanguard REIT | Vanguard | 473.73 | 10,691.73 | 2,815.04 |
| Asset Class | Net Flows ($, mm) | AUM ($, mm) | % of AUM |
| U.S. Equity | 142.65 | 533,171.31 | 0.03% |
| International Equity | 5,390.70 | 296,656.88 | 1.82% |
| U.S. Fixed Income | 4,149.72 | 191,577.08 | 2.17% |
| International Fixed Income | 395.97 | 13,893.92 | 2.85% |
| Commodities | 2,907.21 | 122,537.76 | 2.37% |
| Currency | -285.85 | 3,864.91 | -7.40% |
| Leveraged | -465.82 | 13,820.40 | -3.37% |
| Inverse | 498.38 | 20,300.24 | 2.46% |
| Asset Allocation | 19.61 | 1,070.54 | 1.83% |
| Alternatives | 1,045.91 | 4,231.08 | 24.72% |
| Total: | 13,798.48 | 1,201,124.13 | 1.15% |
| February 2012 League Table | ||||
| Issuer | Net Flows | AUM ($M) | % of AUM | Turnover |
| BlackRock | 3,059.37 | 501,877.42 | 0.61% | 334,437.26 |
| SSgA | -549.97 | 296,200.58 | -0.19% | 596,628.26 |
| Vanguard | 5,635.93 | 199,623.11 | 2.82% | 46,770.35 |
| Invesco PowerShares | 1,472.43 | 69,063.34 | 2.13% | 80,405.79 |
| Van Eck | -100.88 | 26,601.85 | -0.38% | 27,324.71 |
| ProShares | 355.07 | 22,920.10 | 1.55% | 65,751.58 |
| WisdomTree | 900.33 | 15,142.76 | 5.95% | 4,171.68 |
| Rydex | -155.31 | 8,241.84 | -1.88% | 7,127.56 |
| Barclays Capital | 982.26 | 7,894.96 | 12.44% | 20,488.06 |
| First Trust | 270.03 | 7,541.70 | 3.58% | 2,115.09 |
| Direxion | -315.44 | 7,114.68 | -4.43% | 64,943.14 |
| Charles Schwab | 366.39 | 6,322.85 | 5.79% | 1,254.99 |
| ETF Securities | 210.10 | 4,417.39 | 4.76% | 1,366.37 |
| JPMorgan Chase | 354.73 | 4,238.87 | 8.37% | 1,269.71 |
| Guggenheim | 290.15 | 3,833.37 | 7.57% | 998.21 |
| PIMCO | -351.38 | 3,744.26 | -9.38% | 1,282.04 |
| US Commodity Funds | 469.77 | 3,394.89 | 13.84% | 12,042.23 |
| ALPS | 336.74 | 2,892.53 | 11.64% | 715.29 |
| Global X | 32.49 | 1,392.57 | 2.33% | 426.32 |
| Merrill Lynch | 16.35 | 1,366.04 | 1.20% | 258.24 |
| VelocityShares | 336.50 | 1,165.22 | 28.88% | 9,802.10 |
| UBS | -36.32 | 1,038.82 | -3.50% | 198.03 |
| Emerging Global Shares | 41.91 | 679.19 | 6.17% | 134.97 |
| GreenHaven | 57.06 | 676.88 | 8.43% | 140.58 |
| FlexShares | 47.68 | 652.05 | 7.31% | 79.26 |
| IndexIQ | 23.38 | 489.69 | 4.77% | 77.02 |
| RevenueShares | -4.57 | 489.54 | -0.93% | 75.28 |
| Credit Suisse | 38.98 | 434.97 | 8.96% | 102.81 |
| AdvisorShares | 12.69 | 421.60 | 3.01% | 140.45 |
| Russell | 20.66 | 290.77 | 7.11% | 58.57 |
| Precidian | 14.33 | 193.01 | 7.42% | 39.81 |
| Deutsche Bank | - | 177.76 | 0.00% | 8.41 |
| RBS Securities | 4.35 | 140.34 | 3.10% | 35.56 |
| Jefferies | 5.02 | 106.32 | 4.72% | 18.13 |
| FocusShares | 2.57 | 89.58 | 2.87% | 28.98 |
| Teucrium | -0.48 | 82.37 | -0.58% | 38.47 |
| FFCM | - | 44.22 | 0.00% | 2.01 |
| Morgan Stanley | - | 31.87 | 0.00% | 1.62 |
| Goldman Sachs | -49.17 | 30.10 | -163.34% | 11.92 |
| Columbia | - | 22.74 | 0.00% | 4.38 |
| FactorShares | - | 18.66 | 0.00% | 12.54 |
| Pax World | 2.33 | 14.26 | 16.36% | 11.51 |
| CitiGroup | 2.38 | 9.08 | 26.27% | 5.89 |
| Fidelity | - | - | - | 22.73 |
Appetite For Risk
Following VWO, which grew by 10 percent last month to become a fund with more than $55 billion in assets, the other huge ETF in the developing-markets space, the iShares MSCI Emerging Markets Index Fund (NYSEArca: EEM), was second in creations.
Investors poured $1.45 billion into EEM, and its assets also climbed about 10 percent, to just over $41 billion.
A third developing-markets ETF on our top 10 creations list was the WisdomTree Emerging Markets Equity Income Fund (NYSEArca: DEM). It pulled in more than $477 million in new money, and its total assets shot up by almost a quarter, to $3.33 billion.
As noted, the interest in junk bond funds also reflected increased risk appetite.
Investors added $1.14 billion to the SPDR Barclays Capital High Yield Bond ETF (NYSEArca: JNK) and another $813.1 million to the iShares iBoxx $ High Yield Corporate Bond Fund (NYSEArca: HYG).
Gold Bulls And Other Bearish Tales
The SPDR Gold Shares (NYSEArca: GLD), SSgA’s physical bullion ETF, meanwhile gathered $1.30 billion in fresh assets, as some investors continued to fret about underlying weakness in the global economy as well as the inflationary effect of the easy-money policies in much of the developed world.
The suspicion that markets have perhaps become too placid in recent weeks could also be seen in creations of more than $900 million in the iPath S&P 500 VIX Short-Term Futures ETN (NYSEArca: VXX).
The world of VIX-related exchange-traded products was in the headlines in the past week when the VelocityShares Daily 2X VIX Short-Term ETN (NYSEArca: TVIX), a popular double-exposure long VIX exchange-traded note, halted creations because assets were flowing in too quickly.
Indeed, with nearby CBOE Volatility, or VIX, futures below $20, a fair number of investors have been going long securities like VXX and TVIX, expecting something would roil markets again, such as more missteps in the eurozone or violence in the oil-rich Middle East. VIX futures were at $50 last summer when Standard & Poor’s downgraded U.S. debt, and traded around $80 when financial markets in unraveled in 2008.
Investors meanwhile pulled $1.22 billion out of the iShares MSCI EAFE Index Fund (NYSEArca: EFA) a fund focused on developed-market equities outside of North America. EFA was the No. 2 fund on our “Biggest Losers” table.
Last month’s least popular fund was the SPDR S&P 500 ETF (NYSEArca: SPY), and the iShares S&P 500 Index Fund (NYSEArca: IVV) was the No. 3 fund on the monthly redemptions list. SPY bled $3.56 billion while IVV had outflows of $805.3 million.
It’s hard to know exactly why the funds lost assets during a month when the S&P 500 Index rose more than 4 percent, but it’s just possible investors were ditching the biggest and most liquid ETFs for riskier pockets of the market.
| Biggest Losers ($, Millions) | |||||
| Ticker | Name | Issuer | February 2012 Flows | February 2012 AUM ($, M) | February 2012 Turnover |
| SPY | SPDR S&P 500 | SSgA | - 3,563.72 | 99,595.05 | 409,819.71 |
| EFA | iShares MSCI EAFE | BlackRock | - 1,223.83 | 39,415.90 | 21,776.60 |
| IVV | iShares S&P 500 | BlackRock | -805.32 | 28,477.25 | 11,109.36 |
| VTI | Vanguard Total Stock Market | Vanguard | -756.90 | 20,766.88 | 3,937.58 |
| DIA | SPDR Dow Jones Industrial Average Trust | SSgA | -640.10 | 11,826.71 | 17,757.19 |
| XLU | Utilities Select SPDR | SSgA | -488.52 | 6,324.57 | 4,494.25 |
| XLF | Financial Select SPDR | SSgA | -461.92 | 6,382.61 | 19,806.19 |
| IEF | iShares Barclays 7-10 Year Treasury Bond | BlackRock | -440.09 | 4,637.40 | 2,099.58 |
| EWZ | iShares MSCI Brazil | BlackRock | -414.42 | 10,568.94 | 19,994.51 |
| SHY | iShares Barclays 1-3 Year Treasury Bond | BlackRock | -413.99 | 10,651.72 | 3,253.75 |
| ETF Giants ($, Millions) | |||||
| Ticker | Name | Issuer | February 2012 Flows | February 2012 AUM ($, M) | February 2012 Turnover |
| SPY | SPDR S&P 500 | SSgA | -3,563.72 | 99,595.05 | 409,819.71 |
| GLD | SPDR Gold | SSgA | 1,297.08 | 73,592.21 | 45,226.20 |
| VWO | Vanguard MSCI Emerging Markets | Vanguard | 2,458.93 | 55,083.40 | 21,651.00 |
| EEM | iShares MSCI Emerging Markets | BlackRock | 1,447.68 | 41,056.79 | 47,402.90 |
| EFA | iShares MSCI EAFE | BlackRock | -1,223.83 | 39,415.90 | 21,776.60 |
| QQQ | PowerShares QQQ | Invesco PowerShares | 212.28 | 33,268.32 | 69,616.23 |
| IVV | iShares S&P 500 | BlackRock | -805.32 | 28,477.25 | 11,109.36 |
| TIP | iShares Barclays TIPS Bond | BlackRock | -153.93 | 22,888.95 | 2,846.82 |
| VTI | Vanguard Total Stock Market | Vanguard | -756.90 | 20,766.88 | 3,937.58 |
| LQD | iShares iBoxx $ Investment Grade Corporate Bond | BlackRock | 809.39 | 19,563.38 | 4,645.63 |
| Liquidity Mavens | |||||
| Ticker | Name | Issuer | February 2012 Flows | February 2012 AUM ($, M) | February 2012 Turnover |
| SPY | SPDR S&P 500 | SSgA | -3,563.72 | 99,595.05 | 409,819.71 |
| IWM | iShares Russell 2000 | BlackRock | 117.11 | 16,017.52 | 83,177.56 |
| QQQ | PowerShares QQQ | Invesco PowerShares | 212.28 | 33,268.32 | 69,616.23 |
| EEM | iShares MSCI Emerging Markets | BlackRock | 1,447.68 | 41,056.79 | 47,402.90 |
| GLD | SPDR Gold | SSgA | 1,297.08 | 73,592.21 | 45,226.20 |
| EFA | iShares MSCI EAFE | BlackRock | -1,223.83 | 39,415.90 | 21,776.60 |
| XLE | Energy Select SPDR | SSgA | 468.02 | 8,445.96 | 21,703.18 |
| VWO | Vanguard MSCI Emerging Markets | Vanguard | 2,458.93 | 55,083.40 | 21,651.00 |
| TNA | Direxion Daily Small Cap Bull 3x | Direxion | -43.32 | 853.55 | 20,316.33 |
| EWZ | iShares MSCI Brazil | BlackRock | -414.42 | 10,568.94 | 19,994.51 |
