From the March 01, 2011 issue of Futures Magazine • Subscribe!

ETF Guide: A rising tide

Click here for Futures' 2011 ETF Guide.


In 2009, the exchange-traded fund (ETF) industry recovered from its first significant contraction since its birth in 1993. As the stock market rallied, dollars poured into ETFs and by the end of the year the industry boasted more than $700 billion in assets, according to the Investment Company Institute (ICI), a national association that represents U.S. investment companies.

However, that growth was selective. While assets under management and the number of ETFs offered by the investment community rose in 2009, volumes fell. Indeed, the average daily volume of the ETFs in Futures’ 2010 ETF Guide was nearly 2 million units less than the year before. Although funds were flowing, activity was slowing. In addition, although investors returned to all asset classes that year, bond ETFs more than doubled to $107 million while domestic equities grew by less than a third.

In 2010, asset growth not only continued, it did so broadly. Nearly all sectors surged by healthy rates, while the drop in average daily volume for the funds that are included in Futures’ 2011 ETF Guide leveled off. And that growth was steady, powering higher throughout the year (see "High-octane recovery," below).

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The ICI reports that ETF assets increased to $927.62 billion by November 2010, a rise of $189.70 billion or 25.7% over November 2009. Domestic equity ETFs attracted a large part of those funds, increasing by $96.19 billion since November 2009. International market ETFs, which along with bond ETFs also recovered strongly in 2009, attracted an additional $56.66 billion in 2010. At the end of November 2010, bond funds held $140.97 billion and hybrid funds held $312 million (see "Across the board," right).

Futures’ ETF Guide includes all ETFs that traded more than 100,000 units a day, on average, the last quarter of the previous year. Based on that period in 2010, 342 ETFs made the cut (out of 920 available at the end of the year). In 2009, 294 ETFs were included in the Guide. With ETF activity spread out across an increasingly broader base, however, the average daily volume of all the ETFs in the Guide continued to thin out, sliding about another 1 million units a day in 2010.

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