ETFs Gaining Popularity

1/17/2011


 

More than 175 exchange-traded funds (ETFs) debuted in 2010, bringing the total to more than 970. A broad stock rally in December and robust investor inflows helped ETF assets top $1 trillion at year-end, up 28% from 2009. Just five years earlier, assets stood at $311 billion. We looked at last year's activity and unearthed some interesting details:

• Among the new ETFs, 120 are stock funds, 34 invest in bonds, and 16 relate to commodities, with the remainder a hodgepodge of strategies. Across new stock ETFs, ALPS Alerian MLP ($16; AMLP) saw the strongest inflows, collecting more than $600 million in assets since its August launch. Among all U.S. stock ETFs, SPDR S&P Dividend ($52; SDY) had the largest inflows, at $3.5 billion in 2010.

POPULAR NEW EXCHANGE-TRADED FUNDS
The eight ETFs listed below have attracted the most assets since their launches in 2010. Most are specialized funds not suitable as core holdings.
Exchange-Traded Fund
(Price; Ticker)
Exp.
Ratio
(%)
Total
Assets
($Mil.)(
Category
ETFS Physical Palladium Shares
($78; PALL)
0.60
870
Precious
Metals
ETFS Physical Platinum Shares
($176; PPLT)
0.60
778
Precious
Metals
ALPS Alerian MLP ($16; AMLP)
0.85
628
Equity
Income/Energy
WisdomTree Emerging Mkt.
Local Debt ($52; ELD)
0.55
604
Emerging
Mkts. Bond
Global X Silver Miners
($25; SIL)
0.65
382
Precious
Metals
iShares MSCI Indonesia Invest.
Mkt. ($27; EIDO)
0.61
310
Emerging
Mkts. Stock
Schwab Emerging Markets
Equity ($29; SCHE)
0.25
295
Emerging
Mkts. Stock
Mkt. Vectors Rare Earth/Strat.
Metals ($24; REMX)
0.57
290
Metals/
Materials

• Wisdom Tree Emerging Markets Local Debt ($52; ELD) was the most popular new bond fund, attracting more than $580 million in assets since opening six months ago. Among all bond ETFs, SPDR Barclays Capital High Yield Bond ETF ($40; JNK) had the largest inflows — roughly $2.8 billion in 2010.

• Emerging-market ETFs dominated last year's international offerings, with 15 new funds. Notably, Schwab Emerging Markets Equity ($29; SCHE) and iShares MSCI Indonesia ($27; EIDO) have taken in a combined $600 million since opening. Vanguard Emerging Markets ($48; VWO), which opened in 2005, saw assets swell by $19.3 billion last year — tops among all ETFs.

• Actively managed ETFs, which pick investments like traditional mutual funds rather than mimicking an index, are slowly gaining traction, though assets remain a drop in the bucket. At year-end there were 33 actively managed ETFs, up from 22 a year earlier, with total assets of only $3 billion. Nearly one-half have less than $20 million in assets, while PIMCO Enhanced Short Maturity ($101; MINT) is the largest, with more than $820 million. 

• A price war among ETF issuers has helped push expenses lower, with Vanguard setting the pace. Vanguard Emerging Markets and iShares MSCI Emerging Markets ($47; EEM) track the same index, but the Vanguard fund charges 0.27%, compared to 0.69% for the iShares ETF. In September, Vanguard S&P 500 ETF ($58; VOO) launched with a tiny 0.06% expense ratio.

 

FORECASTS FUND RECOMMENDATIONS
Through Jan. 11, our recommended Growth Portfolio has returned 0.7% for the year, versus 0.8% for its benchmark portfolio. The Conservative Portfolio has returned 0.6%, versus 0.5% for its benchmark.
--- Year-to-Date ---
---- % of Portfolio ----
Fund (Price; Ticker)
Return
(%)
Rank
Conser-
vative
(%)
Growth
(%)
Fund
Rating
American Century Heritage
($21; TWHIX)
2.1
B
9
10
66
Buffalo Growth
($25; BUFGX)
1.4
D
9
10
98
Dreyfus MidCap Index
($28; PESPX)
1.4
B
0
0
92
Dreyfus Small Cap Stock Index
($21; DISSX)
0.6
D
0
0
62
Heartland Select Value
($29; HRSVX)
0.9
D
7
10
85
Heartland Value Plus
($30; HRVIX)
0.8
C
9
10
100
T. Rowe Price Int'l Discovery
($44; PRIDX)
(0.6)
D
5
6
45
T. Rowe Price New Horizons
($34; PRNHX)
1.2
D
9
10
98
Vanguard 500 Index
($117; VFINX)
1.4
B
5
5
58
Vanguard Dividend Growth
($14; VDIGX)
0.2
E
8
9
92
Vanguard Emerging Mkts.
Stock Indx. ($30; VEIEX)
(0.5)
C
0
5
88
Vanguard GNMA ($11; VFIIX)
(0.1)
D
4
0
93
Vanguard Inter.-Term Tax
Exempt ($13; VWITX)
(0.3)
C
0
0
62
Vanguard International Value
($32; VTRIX)
(0.1)
C
8
6
83
Vanguard Short-Term Invest.
Grade ($11; VFSTX)
0.2
C
0
0
82
Vanguard Total Bond Mkt. Index ($11; VBMFX)
(0.1)
E
12
0
66
Vanguard Total Int'l Stock
Index ($16; VGTSX)
(0.6)
D
6
6
87
Vanguard Wellesley Income
($22; VWINX)
0.1
E
0
0
95
Vanguard Wellington
($31; VWELX)
0.6
D
5
8
81
Wells Fargo Advantage High
Income ($7; STHYX)
0.8
D
4
5
57
* Year-to-date ranks through Jan. 11 from Morningstar, comparing performance among funds with same objectives. A = top 20%; B = next 20%; C= middle 20%; D = next 20%; E = bottom 20%. Fund ratings are percentile ranks based on our fund-rating system.

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