ETF Flows Reached Monthly Record In Dec.

January 12, 2015

Investors plowed a monthly-record $52.57 billion into U.S.-listed ETFs in December 2014, putting emphasis on an already-record year of inflows in 2014. It all happened in a month when total U.S.-listed ETF assets rose above $2 trillion for the first time.

Year-to-date flows were already at a record at the end of November, when creations of $42 billion lifted the year-to-date asset-haul to more than $192 billion—more than the record $188 billion gathered in all of 2013. Together, November and December inflows were about $94 billion, or just shy of 40 percent of the $243 billion annual asset-gathering total in 2014, according to data compiled by

Overall, the flows picture suggests that investors are waking up to the virtues of ETFs at a quickening pace; namely, their relatively cheap expense ratios, transparent structures and tax efficiency. Also, for more speculative investors, the facts that ETFs are so tradable, are optionable as well as shortable, also loom as advantages to single securities, open-end mutual funds or hedge funds.

Compared with the nearly $2.007 trillion invested in U.S.-listed ETFs at the end of December, hedge funds have around $3 trillion, while mutual funds have about $15 trillion.

U.S. equities dominated the flows picture, pulling in almost $45 billion in fresh assets. That was a conspicuous example of global capital flows into the U.S. as the Federal Reserve continues to hint that interest rates may rise late in 2015 amid ongoing signs that the U.S. economy continues to recover after the 2008-2009 market crash.

The SPDR S&P 500 ETF (SPY | A-98), the world’s biggest ETF, led all other funds in asset-gathering, adding nearly $18 billion in fresh assets. The WisdomTree Europe Hedged Equity Fund (HEDJ | B-47), an ETF designed to shield U.S. investors from the euro’s slide against the dollar, added $1.27 billion in new assets in December, cementing the now-$5.6 billion fund’s place as 2014’s blockbuster.

Another sign of capital flows into the U.S. was the interest investors had in U.S. bond ETFs. Interestingly, investors favored broad funds such as the Vanguard Total Bond Market ETF (BND | A-94) and the iShares Core U.S. Aggregate Bond ETF (AGG | A-98). Funds with shorter-dated debt suffered redemptions—a sign investors became less worried that Fed tightening would occur anytime soon.

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