Uncertainty a definite plus for ETFs as assets hit record

Nearly $188B in net inflows in 2012; tactical, strategic

By Jeff Benjamin

Jan 4, 2013 @ 10:45 am (Updated 11:20 am) EST

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The exchange-traded-funds industry is enjoying a boost in its popularity, thanks to growing levels of political and economic uncertainty, according to the latest report from ETFGI LLP.

The research firm said assets in exchange-traded products listed in the U.S. set a record in 2012 of $1.35 trillion, a 27% increase over 2011.

The increase was a combination of market performance and record net new assets of $187.2 billion, which compares with $118.4 billion in 2011.

The previous record from net inflows was $176 billion in 2008.

“The flow data is a very good indicator of how investors are tactically and strategically adjusting their allocations to political, economic and other uncertainties that are impacting markets,” said ETFGI managing partner Deborah Fuhr.

The record-level flows, she added, “show that these products are increasingly being embraced by institutional investors, financial advisers and retail investors for strategic and tactical asset allocations.”

There are 1,447 exchange-traded products offered by 53 providers and three exchanges, yet the top three providers continue to dominate the industry.

BlackRock Inc.'s iShares, State Street's SPDR ETFs and The Vanguard Group Inc. combined to account for $151.4 billion, or 81%, of net new assets in 2012.

Broken down, iShares gathered in $62 billion, followed by Vanguard at $53.4 billion, and SPDR with $36 billion in net inflows.

Equity ETFs accounted for $121.5 billion of the total net inflows, followed by fixed-income at $46.3 billion and commodity ETFs with net inflows of $13.7 billion.

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