The house that Bogle built crushed its competition with massive first-quarter ETF inflows.
Vanguard, the fund company created four decades ago around the idea of cheap and efficient index funds, utterly dominated ETF gathering in the first quarter, pulling in upward of 90 percent of the more than $15 billion that investors poured into U.S.-listed ETFs in the first three months of the year.
Between those flows and the S&P 500 Index’s 1.81 percent rise in the quarter, ETF assets rose to $1.736 trillion—up 2 percent from the end of the last year and up almost 20 percent from the end of 2013’s first quarter, according to data compiled by ETF.com Analytics.
Despite’s Vanguard’s impressive inflows, net equity flows were shy of $2 billion and were actually negative for U.S. equities—a fact that reflects the “risk off” flavor in markets that prevailed for much of the beginning of first quarter. While flows into bonds were in excess of $11 billion, the 10 most popular ETFs of the quarter were focused on equities, save for two.
That small equity-inflows figure explains why first-quarter net inflows amounted to just 28 percent of year-earlier net inflows of $54 billion. That huge number in the 2013 first quarter was linked to about $49 billion of inflows into equities. It seems fair to say that unless inflows kick into high gear, last year’s record ETF inflows of more than $188 billion won’t be matched this year.
Vanguard’s asset haul totaled almost $13 billion, and included large inflows into a number of its already-large ETFs, including two focused on Europe. Europe is an investment destination that has turned decidedly rewarding since July 2012, when European Central Bank President Mario Draghi made clear that the ECB would play the crucial role of lender of last resort for the debt-plagued eurozone.
More broadly, Vanguard’s continued success at marketing its “pure beta” capitalization-weighted index strategies will no doubt create additional pressures on an ETF industry already intensely focused on keeping costs low. Vanguard is owned by its fund holders, and expense ratios on its funds drop as a matter of course as long as assets grow, which they clearly do.
There’s little doubt at this point that the Malvern, Pa.-based firm founded by fund industry legend John Bogle is close to moving up one notch to the No. 2 spot on ETF.com’s League Table. Vanguard has total ETF assets of $351 billion, compared with $379 billion for State Street Global Advisors, currently the second-biggest ETF company in the world.
SSgA suffered outflows of more than $18 billion in the first quarter. Just about all of SSgA’s outflows were from the SPDR S&P 500 ETF (SPY | A-98), the world’s oldest and biggest ETF—and, by far, its most heavily traded.
Vanguard ETFs Among Top 3
As noted, some of Vanguard’s most popular funds were spread all over the top 10 ETFs table in the first quarter. Those funds, their inflows and their assets were as follows:
- Vanguard FTSE Europe ETF (VGK | B-94), inflows of $2.0 billion; total assets of $15.8 billion
- Vanguard REIT ETF (VNQ | A-88), inflows of $1.9 billion; total assets of $21.0 billion
- Vanguard FTSE Developed Markets ETF (VEA), inflows of $1.8 billion; total assets of $20.8 billion
Even the company’s big aggregate bond fund, the Vanguard Total Market Bond ETF (BND) made it onto the top 10 list, hauling in $1.5 billion, ending the quarter with $19.38 billion. Again, net inflows into fixed-income strategies totaled more than $11 billion in the quarter.
First Trust’s Big Quarter
First Trust, the company behind the large and successful Internet-focused ETF, the First Trust Dow Jones Internet Fund (FDN | A-97), had the most impressive quarter on a percentage basis.
It pulled in $3.68 billion in the first quarter, and its total assets rose to almost $24 billion—a more than 15 percent jump on the quarter.
Also, Guggenheim Partners’ ETF assets jumped by almost 10 percent in the quarter. It had net inflows of $2.32 billion, and it ended the quarter with $20.89 billion.
|Q1 2014 Flows By Asset Class|
|Net Flows ($M)||AUM ($M)||% of AUM|
|U.S. Fixed Income||10,751.31||242,566.06||4.43%|
|International Fixed Income||494.26||21,615.70||2.29%|
|Q1 2014 Top Gainers|
|VGK||Vanguard FTSE Europe||Vanguard||2,025.97||15,817.31||17,636.97|
|VEA||Vanguard FTSE Developed Markets||Vanguard||1,862.42||20,802.14||8,949.00|
|EZU||iShares MSCI EMU||BlackRock||1,680.75||10,278.14||10,604.54|
|VTI||Vanguard Total Stock Market||Vanguard||1,643.53||41,449.26||19,794.41|
|UWM||ProShares Ultra Russell 2000||ProShares||1,636.66||1,801.23||3,799.85|
|VOO||Vanguard S&P 500||Vanguard||1,525.33||16,703.19||13,589.57|
|BND||Vanguard Total Bond Market||Vanguard||1,496.82||19,381.39||11,236.57|
|CSJ||iShares 1-3 Year Credit Bond||BlackRock||1,420.19||13,245.73||5,268.23|
|XLF||Financial Select SPDR||SSgA||1,254.25||18,693.25||63,563.33|
|Q1 2014 Biggest Losers|
|SPY||SPDR S&P 500||SSgA||-18,927.08||157,180.26||1,422,616.93|
|EEM||iShares MSCI Emerging Markets||BlackRock||-7,481.18||31,884.49||195,348.66|
|VWO||Vanguard FTSE Emerging Markets||Vanguard||-3,673.81||42,393.07||49,741.60|
|IJH||iShares Core S&P Mid-Cap||BlackRock||-2,473.16||20,641.12||11,973.22|
|HYG||iShares iBoxx $ High Yield Corporate Bond||BlackRock||-2,003.17||13,223.29||25,484.20|
|XLY||Consumer Discretionary Select SPDR||SSgA||-1,614.90||5,644.99||26,838.31|
|MVV||ProShares Ultra MidCap 400||ProShares||-1,476.21||159.50||2,890.35|
|XLP||Consumer Staples Select SPDR||SSgA||-1,241.01||5,417.08||25,772.48|
|QQQ||PowerShares QQQ||Invesco PowerShares||-1,233.53||43,936.97||216,772.44|
|MOO||Market Vectors Agribusiness||Van Eck||-1,175.56||3,421.96||1,590.34|
|Q1 2014 League Table|
|Issuer||Net Flows||AUM ($M)||% of AUM||Turnover|
|US Commodity Funds||-341.17||1,974.39||-17.28%||35,709.62|
|Emerging Global Shares||-38.52||1,469.96||-2.62%||859.76|
|Exchange Traded Concepts||353.02||1,272.09||27.75%||607.32|
|Highland Capital Management||21.84||149.25||14.63%||78.56|
|Arrow Investment Advisors||19.56||111.93||17.47%||122.60|
|Huntington Strategy Shares||0.84||31.03||2.69%||1,199.06|