Most Popular ETFs Of The Year

Investors flocked to ETF giants to get their stock and bond exposure in 2016.

In the ETF world, the rich get richer. The biggest funds by assets typically attract the largest flows each year. In that regard, 2016 was no exception.

The smallest ETF to make the top 10 inflows list for the year has an impressive $16.9 billion in assets, according to FactSet. The other ETFs on the list are much larger still.

Together, these 10 ETFs took in $87.1 billion of fresh investor money in the year-to-date period ending Dec. 6. To put that in context, total flows into all ETFs so far this year have been $225 billion.

There's still another three weeks left to go in the year, so the final numbers could change (we'll publish the official figures once they're released). But if there's any conclusion to be reached from these numbers, it's that investors still favor plain-vanilla index ETFs over their more complex counterparts―whether it be smart-beta funds, active funds or otherwise.

Investors Embrace S&P 500 ETFs

Indeed, for all this year's hype about "smart beta," it's "dumb beta" that investors wanted. In particular, when it comes to U.S. equities, investors plowed billions into S&P 500 ETFs. Three out of the top four funds on the flows list track the venerable large-cap index, including the SPDR S&P 500 ETF (SPY), the iShares Core S&P 500 ETF (IVV) and the Vanguard S&P 500 Index Fund (VOO)―all with inflows of more than $10.7 billion.

The only other U.S.-focused equity fund to make the cut was the broader Vanguard Total Stock Market Index Fund (VTI), but its year-to-date flows of $5.2 billion were less than half that of the three S&P 500 funds.

Emerging Market Comeback

In a year that featured concerns about China and "Brexit," it's no wonder investors preferred U.S. equities. Even so, a trio of international equity ETFs also showed up in the top 10. The Vanguard FTSE Developed Markets ETF (VEA), which tracks developed-market stocks outside the U.S., had inflows of $8.8 billion in the year-to-date period.

At the same time, two low-cost emerging market ETFs—the Vanguard FTSE Emerging Markets ETF (VWO) and the iShares Core MSCI Emerging Markets ETF (IEMG)—made an appearance on the list, with inflows of $8.8 billion, and $6.5 billion, respectively.

GLD Falls Down The Ranks
Meanwhile, three nonequity ETFs found themselves on the list. The iShares Core U.S. Aggregate Bond ETF (AGG) took in $10.9 billion so far this year. AGG provides exposure to the market of U.S. investment-grade bonds, weighted by market value.

The iShares TIPS Bond ETF (TIP) was another popular bond fund, with inflows of $6.6 billion. TIP holds Treasury inflation-protected securities, a type of U.S. government bond that protects investors in a rising-rate environment.

The SPDR Gold Trust (GLD) is another inflation-hedge in the top 10. The physically backed gold ETF was at the top of the flows leader board for much of the year, but fell down the ranks rapidly in the weeks following Donald Trump's victory at the polls. A post-election spike in interest rates and the U.S. dollar led GLD to lose some of its luster.

Incidentally, GLD is the most expensive ETF on the top inflows list, with an expense ratio of 0.40%. All the other funds in the top 10 have an expense ratio of 0.20% or less.

Flows For Jan. 1 to Dec, 6, 2016

Contact Sumit Roy at [email protected]