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October ETF Scorecard

Investors flocked to emerging market and fixed income funds in October.
Author:

NEW YORK (

TheStreet

) -- ETF investors flocked to emerging market funds in October.

While the purchase of funds like

Vanguard MSCI Emerging Markets

(VWO) - Get Vanguard FTSE Emerging Markets ETF Report

and

iShares MSCI Emerging Markets

(EEM) - Get iShares MSCI Emerging Markets ETF Report

was by far the most dominant trend based on flows, fixed income remains a significant destination of investor dollars.

Money was focused on inflation-protected securities and the short end of the yield curve, and a popular corporate bond ETF,

iShares iBoxx Investment Grade Corporate Bond

(LQD) - Get iShares iBoxx $ Investment Grade Corporate Bond ETF Report

even saw significant outflows.

Vanguard MSCI Emerging Markets

(VW0)

saw $2.2 billion in net inflows last month, closely followed by the $1.76 billion that flowed into

iShares MSCI Emerging Markets

(EEM) - Get iShares MSCI Emerging Markets ETF Report

.

The sum of these two net inflows was equivalent to 45% of the net inflows across all ETFs and ETNs -- and they weren't the only emerging market funds with sizable inflows.

Market Vectors Russia

(RSX) - Get VanEck Vectors Russia ETF Report

had $238 million in inflows and, more impressively,

Market Vectors Brazil Small Cap

(BRF) - Get VanEck Vectors Brazil Small-Cap ETF Report

had $195 million - which was equivalent to 67% of its September 30 AUM.

All together, the net inflows for all global and international equity long ETFs in October was $7.47 billion, or 85% of net inflows and more than 50% of the gross inflows of $13.88 billion.

The next four largest inflows were for U.S. bond funds, led by

iShares Barclays TIPS

(TIP) - Get iShares TIPS Bond ETF Report

, with $589 million in net inflows;

iShares Barclays 1-3 Year Credit

(CSJ)

, $392 million;

Vanguard Barclays Total Bond

(BND) - Get Vanguard Total Bond Market ETF Report

, $356 million; and

Vanguard Barclays Short Term Bond

(BSV) - Get Vanguard Short-Term Bond ETF Report

, $327 million.

iShares JPM USD Emerging Market Bond

(EMB) - Get iShares JP Morgan USD Emerging Markets Bond ETF Report

, also a U.S. dollar-denominated bond fund, was eight in terms of inflows, with $302 million.

The sum of all long bond inflows was $3.07 billion, showing investors' appetites for bonds remains strong, with the inflation protected and short-end of the yield curve most popular -- a sign of continued inflation fears. In conjunction with the huge inflows into emerging markets, it signals investors are not optimistic about the U.S. dollar and/or what that means for interest rates.

In the case of EMB, it holds U.S. dollar-denominated bonds. Investors searching for higher yield are on solid ground, but investors expecting protection from a falling dollar will be surprised should their expected scenario pan out.

Commodity funds absorbed the next highest share of net inflows, led by the ever popular

U.S. Natural Gas

(UNG) - Get United States Natural Gas Fund LP Report

at $308 million, seventh best for the month. The net asset value of UNG declined $263 million, however, as natural gas prices resumed their downward march.

Commodities are another asset class favored by investors fearful of inflation, and

SPDR Gold Shares

(GLD) - Get SPDR Gold Trust Report

was the next most popular destination after UNG, with $272 million in inflows.

iShares Comex Gold

(IAU) - Get iShares Gold Trust Report

saw $171 million enter the fund, while

ETFS Gold

TheStreet Recommends

(SGOL) - Get Aberdeen Standard Physical Gold Shares ETF Report

had inflows of $92 million.

REITs followed commodities, with $624 million in inflows, led by the $295 million that flowed into

Vanguard Morgan Stanley REIT

(VNQ) - Get Vanguard Real Estate ETF Report

.

U.S. long equities saw outflows of $4.8 billion, and adding on the $348 million to short ETFs, represented more than $5 billion either flowing out of or bet against U.S. equities. The ETF with the single largest inflow was

SDPR Consumer Staples

(XLP) - Get Consumer Staples Select Sector SPDR Fund Report

, with $300 million, good for tenth overall.

At the other end, the outflows were led by

SPDRs

(SPY) - Get SPDR S&P 500 ETF Trust Report

, with $2.3 billion exiting in October.

More important was the $1.1 billion that flowed out of

iShares Russell 2000

(IWM) - Get iShares Russell 2000 ETF Report

, equivalent to 8.5% of September 30 AUM.

iShares Russell 2000 Value

(IWN) - Get iShares Russell 2000 Value ETF Report

had the tenth largest outflow, at $232 million. I covered the Russell 2000 several times on my Real Money blog in the past month because it was underperforming the other major indexes.

Other net outflows leaders were

iShares iBoxx Investment Grade Corporate Bond

(LQD) - Get iShares iBoxx $ Investment Grade Corporate Bond ETF Report

, $706 million;

U.S. Oil

(USO) - Get United States Oil Fund LP Report

, $509 million;

PowerShares QQQ

(QQQQ)

, $432 million;

SPDR Financial

(XLF) - Get Financial Select Sector SPDR Fund Report

, $354 million;

SPDR Consumer Discretionary

(XLY) - Get Consumer Discretionary Select Sector SPDR Fund Report

, $268 million;

iShares FTSE/Xinhua China 25

(FXI) - Get iShares China Large-Cap ETF Report

, $258 million; and

Vanguard Mega Cap 300 Growth

(MGK) - Get Vanguard Mega Cap Growth ETF Report

, $247 million.

The outflow from the corporate bond fund lines up with the inflows into TIPS and short-term Treasuries as part of a larger trend of inflation fears.

Leveraged short and short oil ETNs saw the largest inflows last month, and on net, equity ETFs in the oil service and exploration sectors also saw outflows, though broader energy ETFs saw inflows.

Oil climbed in October and investors holding

ProShares Ultra Short Oil

(DTO) - Get DB Crude Oil Double Short Exchange Traded Notes Report

would have seen their investment drop 17.9%, and the $81 million in net inflows only resulted in a gain in AUM of $56 million as shares lost value.

We saw similar trends in August, when investors became bearish even as the market climbed higher. Whether their bets pay off this time remains to be seen, but the recent move in gold, if carried over to other commodities, suggests further pain could be in store.

Stay tuned for further analysis of October fund flows.

-- Written by Don Dion in Williamstown, Mass.

A special note from Don: To put it simply, I want to help you profit from ETFs. You don't have to be an expert trader -- there are potential profits for investors at every level. And I think there's no better way to jump into the world of ETFs than my brand new service, TheStreet ETF Action by Don Dion. Membership is limited, so click here to get in on the action!

At the time of publication, Dion owned iShares Barclays TIPS, iShares Comex Gold and PowerShares QQQ.

Don Dion is president and founder of

Dion Money Management

, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.