Vanguard, Bond Funds Dominating ETF Flows

ETF Trends

Industry flows for April reveal that Vanguard is cleaning up in the exchange traded fund business as the investment manager gathered more than $4 billion for the month.

“Vanguard collected $4.4 billion in April, which was four times more than the next closest provider and nearly twice as much as the rest of the industry combined. The company’s ETF offerings last experienced a monthly outflow in February 2003,” according to investment researcher Morningstar. [Vanguard ETF Assets Top $200 Billion]

Vanguard along with BlackRock’s iShares and State Street comprise the so-called Big Three of the ETF industry. At the end of April, BlackRock controlled assets of $498.8 billion, State Street had $295.9 billion and Vanguard managed $208.9 billion, according to data from the ETF Industry Association. [Biggest ETF Firms Eschew New Trade Association]

Vanguard is gaining on its rivals, however, by also leading the ETF flow race year to date. Through the end of April, Vanguard had gathered $21.6 billion so far in 2012, while BlackRock collected $13.3 billion and State Street added $7.2 billion, according to the ETF Industry Association. [Vanguard Seen Taking No. 2 ETF Slot: Poll]

Morningstar’s analysis of April ETF flows also reveals that nervous investors piled into bonds.

“ETF asset flows took a breather in April, adding just $2.4 billion in new assets,” the firm said. “Notably, all the net new flows went to taxable- and municipal-bond offerings. These two asset classes collected $5.1 billion while U.S.- and international-stock ETFs shed $2.8 billion. Investment-grade and high-yield offerings took center stage.” [Fixed-Income ETFs Still Attract High Inflows]

A major story in bond ETFs is the rapid growth of PIMCO Total Return ETF (BOND - News) , which was launched in March and is managed by Bill Gross. The ETF is outperforming its mutual fund counterpart. [Evaluating PIMCO Total Return ETF Performance, Liquidity]

BOND has already gathered total assets of about $720 million.

“Just five years ago, many doubted that fixed-income would work in the ETF structure. Just four months ago, many still doubted whether actively managed ETFs would work. PIMCO Total Return ETF is discrediting both myths simultaneously,” Morningstar notes. “The fund is already the third-largest actively managed ETF. BOND was the best-performing intermediate-bond fund in any packaging in April.”

Finally, a desire for income and dividends has made real estate ETFs popular with investors recently. [Best REIT ETFs for Dividends]

“Real estate is back in favor. REIT ETFs gathered $794 million in April, marking the sixth straight month of category inflows. Vanguard was again the winner, with Vanguard REIT Index (VNQ - News) gathering $536 million,” Morningstar said.

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