ETF Winners Could Repeat In 2010

If the market trend continues heading the same direction, most of the ETF winners this year could repeat in 2010.

Here is an article by John Spence of MarketWatch - Dec 14, 2009

"BOSTON (MarketWatch) -- Exchange-traded fund buyers plowed money into ETFs tracking bonds and international stocks this year, and the pattern looks set to continue in 2010 as investors diversify portfolios, protect against losses and chase the hot performance of emerging markets.

This past year was a record for bond ETFs, with investors flocking to a growing number of fixed-income offerings. Through the end of November, taxable-bond ETFs had net inflows of more than $32 billion, the most among the major asset classes, according to investment researcher Morningstar Inc.
As the year draws to a close, here's a list of trends to watch in the ETF business for 2010:  

1. Bonds -- Fixed-income ETFs came late to the party relative to stock funds, but they've been making up for lost time. As of Nov. 30, there were 802 ETFs in the U.S. overseen by 30 managers and a record $739 billion in total industry assets, according to State Street Global Advisors. Of these, 79 were fixed-income ETFs but they held almost $100 billion in assets. After the credit crunch, more investors are playing defense with bonds. Vanguard and Pimco are launching more bond ETFs, which should only increase the visibility of the fixed-income side of the business in 2010. 

2. BlackRock, Vanguard rising -- BlackRock Inc. BLK is the largest ETF manager after its acquisition this year of Barclays Global Investors, followed by State Street Corp. STT . Meanwhile, Vanguard Group has been growing rapidly. Its ETF inflows topped $26 billion for the year through November to take total assets to almost $90 billion. Vanguard is the third-largest ETF provider. BlacRock's integration of BGI and its ETFs is another story to watch next year. 

3. Consolidation - Despite the ETF business' continued impressive growth, assets remain concentrated at the largest funds and providers. Many smaller funds are struggling to attract assets and trading volume, and more may be forced to close next year. Almost 100 ETFs have been liquidated since the end of 2007, according to Morgan Stanley. "The challenging market environment has limited flows into many of the newer ETFs, particularly those with a narrow focus based on less well-known indexes," it said. 

4. Emerging markets - ETF investors had a clear preference for international stocks over U.S. companies in 2009. In particular, they shoveled money at emerging markets ETFs such as Vanguard MSCI Emerging Markets ETF VWO  and iShares MSCI Emerging Markets Index EEM Fund. Yet the recent debt scare in Dubai is a clear warning of the risks and volatility of emerging markets."
(for more  details, click here)