US ETF flows: Vanguard’s low fees win over investors

May 9th, 2012 | By | Category: ETF and Index News

According to data from Morningstar, ETF asset flows took a breather in April, adding just $2.4 billion in new assets. Notably, all the net new flows went to taxable- and municipal-bond offerings. These two asset classes collected $5.1 billion while US- and international-stock ETFs shed $2.8 billion. Investment-grade and high-yield offerings took centre stage, while the only substantial outflow within the space was the iShares Barclays 20+ Year Treasury Bond ETF (TLT).

US ETF flows: Vanguard's low fees win over investors

Vanguard collected $4.4 billion in April, four times more than the next closest provider and nearly twice as much as the rest of the industry combined.

Vanguard collected $4.4 billion in April, four times more than the next closest provider and nearly twice as much as the rest of the industry combined. The company’s ETF offerings last experienced a monthly outflow in February 2003. Oddly enough, the inflow came largely on the backs of equity offerings Vanguard S&P 500 ETF (VOO), Vanguard Dividend Appreciation ETF (VIG), and Vanguard Total Stock Market ETF (VTI), all large-cap blend products.

Just five years ago, many doubted that fixed-income would work in the ETF structure. Just four months ago, many still doubted whether actively managed ETFs would work. Pimco Total Return ETF (BOND) is discrediting both myths simultaneously. Two months and $657 million later (as of time of writing, 9 May 2012, it had reached $730m in AUM), the fund is already the third-largest actively managed ETF. In fact, it beat its biggest mutual fund brother (PTTRX) by more than 0.53% in April. BOND was the best-performing intermediate-bond fund in any wrapper in April.

Real estate is back in favour. REIT ETFs gathered $794 million in April, marking the sixth straight month of category inflows. Vanguard was again the winner, with Vanguard REIT ETF (VNQ) gathering $536 million.

Equity investors are moving down the market capitalisation spectrum. Large-cap US stock ETFs surrendered $2.9 billion in April after gaining $9.4 billion in March. PowerShares’ tech-heavy Nasdaq 100 ETF, the PowerShares QQQ (QQQ), gave up $2.3 billion while SSgA’s mainstays SPDR S&P 500 ETF (SPY) and SPDR Dow Jones Industrial Average ETF (DIA) shed $1.7 and $1.0 billion, respectively.

Small-cap blend ETFs rallied the second-largest Morningstar Category inflow. The category brought in $1.1 billion in April after shedding $1.8 billion in March, with iShares Russell 2000 Index ETF (IWM) accounting for $1.0 billion of the inflow last month.

Disdain for equities knew no boundaries in April. Leading the outflow from the international-stock asset class, iShares MSCI EAFE Index ETF (EFA) gave up $804 million. Emerging-markets funds saw similar trends as iShares MSCI Emerging Markets Index ETF (EEM) lost $687 million after four straight months of modest inflows. Rival Vanguard MSCI Emerging Markets ETF (VWO), meanwhile, enjoyed a fifth straight month of inflows. Notably, VWO lowered its expense ratio from 22 basis points to 20 basis points at the beginning of March.

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