ETF Inflows Increased in May

After growing at a torrid pace in 2008, the ETF industry had showed signs of slowing down through the first four months of 2009. But May represented a return to old form, with more than $14 billion in new assets flowing into ETFs during the month according to Morningstar, the largest monthly inflow of the year so far. This compares to $3.3 billion in net inflows in May 2008 and $9.5 billion during the previous month.

Emerging markets ETFs continued to lead the way in May, attracting nearly $5 billion in assets (35% of total inflows). Five of the top ten gaining funds were emerging market funds, led by iShares MSCI Emerging Markets Index (EEM), which attracted more than $1.1 billion alone. It appears that optimism over a global recovery is leading investors to more risky equity ETFs on hopes that these funds will outperform domestic funds. Leveraged and inverse ETFs accounted for approximately 11% of May's total inflows, down from 27% in April. Other big gainers for the month included natural gas and TIPS ETFs. As far as fund families, iShares, which has been the subject of much takeover speculation lately, claims six of the top ten funds for the month.

Issuer	Fund Name	Ticker	May Inflows ($Mils)
iShares	MSCI Emerging Markets Index	EEM	$1,142
iShares	FTSE/Xinhua 25 Index	FXI	$1,123
iShares	MSCI Brazil Index	EWZ	$1,065
US Commodity Funds	United States Natural Gas	UNG	$929
iShares	Barclays TIPS Bond	TIP	$865
Vanguard	Emerging Markets Stock ETF	VWO	$800
Direxion	Daily Financial Bear 3x Shares	FAZ	$791
iShares	MSCI Taiwan Index	EWT	$746
ProShares	UltraShort S&P 500	SDS	$669
iShares	Russell 2000 Index	IWM	$505

On the down side, ten funds had net monthly outflows of more than $325 million, led by United States Oil (USO), which lost $911 million. Other funds near the top of the May redemptions list included financials, real estate, mid-cap equities, and Treasuries.

Issuer	Fund Name	Ticker	May Outflows ($Mils)
US Commodity Funds	United States Oil	USO	$911
State Street	MidCap SPDRs	MDY	$589
State Street	Financial Select Sector SPDR	XLF	$531
ProShares	Ultra S&P 500	SSO	$505
PowerShares	QQQ	QQQQ	$441
iShares	Dow Jones U.S. Real Estate	IYR	$395
State Street	SPDR	SPY	$366
iShares	Barclays 1-3 Year Treasuries	SHY	$342
iShares	Russell MidCap Index	IWR	$330
State Street	Energy Select Sector SPDR	XLE	$327

Through May, ETF inflows for the year stood at $20.5 billion. For all of 2008, total net inflows to the industry were $176 billion.

Disclosure: Long SPY.

Comments

[User 371966:]

Hi, Is there any thing wrong with the USO outflow in May 2009?

Jun 10 09:48 PM

[White Shield:]

All good news! The question remains...and the homework awaits, which ones are the next trap?

Jun 11 02:04 PM

[gkunker:]

Does the USO outflow allow for the shorting of the fund? I am surprised it is somewhat hard to find the shares to short.

Jun 11 02:08 PM