S&P Sees Continued Rise In ETF Assets

Assets under management for U.S.-listed exchanged-traded products rose to $1.06 trillion at the end of last year, a 5% increase over the 2010 number, and inflows to ETFs and ETNs totaled almost $118 billion in 2011, the fifth year inflows have topped $100 billion, according to the ETF Industry Association. Even with those numbers, S&P Capital IQ still sees exchange-traded products as pilfering assets from mutual funds, something that could pressure more mutual fund providers to get into the ETF game. "In the year ahead, we expect that ETFs will continue to gain market share from mutual funds and individual securities, reflecting greater investor awareness of ETFs as an investment choice, and appreciation of prospective advantages that ETFs offer. We think that growth in the ETF market adds to pressure on mutual fund companies and other financial service companies to offer ETF products," S&P Capital IQ analyst Tom Graves said in a note. Several mutual fund companies have filed plans for ETFs and Pimco, manager of the world's largest bond fund, will offer an ETF equivalent of the Pimco Total Return Fund managed by Bill Gross in March. Fidelity is also expected to enter the ETF arena this year after years of sponsoring just one exchange-traded product. "Among the 20 largest ETFs are 13 that are viewed by S&P Capital IQ as having an equity emphasis, plus six income ETFs and one ETF in the commodity category. As of January 6, 2012, S&P Capital IQ Equity Research's propriety ranking system had an Overall ranking of Overweight on nine of these large equity ETFs, a Marketweight appraisal on two, an Underweight ranking on one, and no ranking available on the 13th of these equity ETFs," S&P Capital IQ said in the note. In the note, S&P Capital IQ reiterated Overweight ratings on the following ETFs SPDR S&P 500 SPY, PowerShares QQQ QQQ, SPDR Dow Jones Industrial Average DIA, iShares S&P 500 Index Fund IVV, iShares Russell 2000 Index Fund IWM, Vanguard Total Stock Market ETF VTI, iShares Russell 1000 Value Index Fund IWD and the iShares Russell 1000 Growth Index Fund IWF. The firm has a Marketweight rating on the iShares Dow Jones Select Dividend Index Fund DVY. SPY is the world's largest ETF by assets with almost $95.4 billion in assets under management at the end of last year.