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ETF Growth Slows on Equity Fund Selling


Exchange traded fund inflows slowed in October as investors shifted away from U.S. equities and into foreign stocks and fixed-income assets.

Compared to the $33 billion added in September, ETFs only attracted $1.9 billion in new inflows over October, the weakest monthly asset growth so far this year, reports Michael Rawson for Morningstar. The ETF industry had accumulated $1.287 trillion in assets at the end of the month.

ETF investors withdrew $11.3 billion out of U.S. stock funds but put $6.5 billion into international stocks and $4 billion into bonds.

Specifically, China region, diversified emerging markets and Europe equities attracted over $1 billion in inflows. While investors piled into the attractive yields in emerging market bonds, high-yield bond options lost $800 million.

Meanwhile, gold funds attracted $1.6 billion. [Eight ETFs for Gold Exposure]

Over the month, iShares brought in the lions share of new ETF assets, adding $7 billion in inflows. Meanwhile, Vanguard garnered $3 billion in assets and  Van Eck Global attracted $800 million. Year-to-date, iShares has added $41.9 billion in assets, Vanguard $44.8 billion and Van Eck $3.7 billion.

The so-called fee war has helped Vanguard bring in more investment assets for most of the year as its competitive pricing undercut iShares. However, over the past month, iShares has followed an aggressive advertising campaign in promoting its restructured “core” ETF suite.

Year-to-date, the industry introduced 159 new ETF products and closed 97 offerings for a net increase of 62 ETFs, compared to the net increase of 278 over 2011.

On the downside, State Street experienced outflows of over $9 billion, with the SPDR S&P 500 ETF (SPY) losing $7 billion. The outflows from SPY can be partly attributed to the restructured iShares Core S&P 500 ETF (IVV) , which now comes with a 0.07% expense ratio compared to SPY’s 0.09%. [Total Stock Market ETFs]

For more information on ETF asset flows, visit our ETF performance reports category.

Max Chen contributed to this article.

Full disclosure: Tom Lydon’s clients own SPY.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.