Michael Johnston's  Instablog

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.

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.

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.