The fourth quarter of 2012 was a mixed bag for the equity
markets. It was a quarter marked by certain domestic as well as
global events which could prove to be game changers in the months
ahead.
Nevertheless, the ETF industry seems to be going strong. A look
at the top 10 asset accumulating ETFs this quarter reveals an
impressive 5.97% increase in terms of total additions to the asset
base over the third quarter of 2012, suggesting that even with some
volatility in the market, demand for ETFs remains strong.
The following table reveals the 10 most popular ETFs in the
final quarter of fiscal year 2012.
Table 1: Top 10 Asset Accumulating ETFs for Q4
12
ETF
|
Category
|
Inflow for Q4
|
4th Quarter Returns
|
EEM
|
Emerging Market Equities
|
$8.86 billion
|
8.46%
|
SPY
|
Broad Market Equities
|
$6.16 billion
|
1.47%
|
IVV
|
Broad Market Equities
|
$3.68 billion
|
1.82%
|
FXI
|
Emerging Market Equities
|
$2.99 billion
|
10.19%
|
GLD
|
Commodities-Gold
|
$1.77 billion
|
-2.88%
|
IWD
|
Broad Market Equities
|
$1.42 billion
|
2.13%
|
VGK
|
Developed Market Equities
|
$1.12 billion
|
6.89%
|
VOO
|
Broad Market Equities
|
$1.14 billion
|
1.59%
|
EMB
|
Emerging Market Bonds
|
$1.09 billion
|
1.61%
|
VTI
|
Broad Market Equities
|
$1.07 billion
|
2.08%
|
(Source: Indexuniverse.com)
Surprisingly, the iShares MSCI Emerging Market ETF
(EEM) makes it to the list and its Vanguard counterpart
VWO is nowhere to be found within the top 10
names. This could partially be due to Vanguard promising to switch
its index from MSCI to FTSE, but Vanguard did suggest that the fees
would be reduced in the move as well.
Although this would result in a cut in the already competitive
expense ratio of 20 basis points for the Vanguard ETF (especially
compared to the 67 basis points that iShares charges), the index
excludes South Korea. Top names like Samsung and Hyundai will
thereby be missing from the ETF portfolio so this could be part of
the shift to EEM by larger investors (read 2012 Was Forgettable for
These Emerging Market ETFs).
Also, it is worthwhile to point out that other Emerging Market
ETFs have also made it to the top 10 asset accumulating list. The
iShares FTSE China Large Cap ETF (FXI) which
provides a pure play in the Chinese large cap equity space has
gained more than 10% this quarter accumulating almost $3 billion in
its asset base.
The Chinese economy has for long been waiting for a turnaround.
The latest bout of optimism from the Chinese economy comes in the
form of rising industrial production coupled with increased
infrastructure spending by the government and a real estate
recovery. These factors have been the key positives for the Chinese
economy (read Try Small Cap ETFs to Gain from Chinese Domestic
Demand).
Of course, a modest recovery in the global economic space has
surely helped the Chinese large cap companies which are more export
oriented than their mid and small cap counterparts.
Also, the iShares J.P.Morgan Emerging Markets USD Bond
ETF (EMB) gained tremendous popularity this quarter. The
paltry yields from the domestic U.S. fixed income market had forced
yield hungry investors to look beyond the shores of the U.S.
Adding to the flavor of this product is that it eliminates
currency risk by considering only U.S. Dollar denominated
securities in its portfolio. Thus investors could get the actual
returns without worrying about the exchange rate movements.
A number of domestic broad market funds have made it to the top
10 list too. The SPDR S&P 500 ETF (SPY), iShares Core
S&P 500 ETF (IVV) and the Vanguard S&P 500
ETF (VOO) the three S&P 500 ETFs have accumulated
$6.16 billion, $3.68 billion and $1.14 billion respectively.
However, IVV leads in terms of returns by fetching investors 1.82%.
This is followed by VOO returning 1.59% and SPY returning
1.47%.
Beyond the S&P 500 ones, other broad market ETFs tracking
other indexes have featured in this elite list. The iShares
1000 Value ETF (IWD) tracking the Russell 1000 Value Index
and the Vanguard Total Stock Market ETF (VTI)
tracking the MSCI US Broad Market Index have made it to the top 10
list.
The former is a large cap ETF tracking 1000 large cap stocks
from the U.S. equity markets whereas the latter is a total market
ETF which is composed of more than 3300 shares and constitutes of
stocks from the entire spectrum of market capitalization.
The fourth quarter was pretty much the most volatile quarter
this fiscal. Although it seemed that the stock markets would end in
the red this quarter especially post the presidential elections, it
actually rebounded and posted positive returns.
Also, there was lack of clarity over the stock market
performance of individual sectors since the third quarter earnings
season was feeble and so was the forward guidance for the upcoming
quarters by the company management.
This kind of explains the popularity for the broad based funds
as investors seemed to play the wait and see game and ride out
sector specific risk by allocating more to broad market funds.
Lastly, of late, gold has not been experiencing the best of
times. In fact the outlook for Gold remains on the negative side at
least in the near to mid-term (see Gold ETFs: Is the Sell-Off
Overdone?). The SPDR Gold ETF (GLD) is the only
ETF in this list which has posted negative returns for the fourth
quarter in spite of accumulating nearly $1.77 billion.
However, Gold still ended the year on a positive note gaining
for the 12th straight year and on a multi-year high
(read Gold ETFs Make 2012 Another Positive Year). And with the
fundamentals not yet completely bearish for the yellow metal, a
recovery in the longer term definitely seems possible.
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(EEM): ETF Research Reports
(EMB): ETF Research Reports
(FXI): ETF Research Reports
(GLD): ETF Research Reports
(IVV): ETF Research Reports
(IWD): ETF Research Reports
(SPY): ETF Research Reports
(VGK): ETF Research Reports
(VOO): ETF Research Reports
(VTI): ETF Research Reports
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