NEW YORK ( TheStreet) -- PowerShares DB U.S. Dollar Bullish Fund ( UUP) was the story of the month in December. A rising U.S. dollar attracted a flood of capital into this ETF, enough to more than double its net assets in one month. The December inflows also accounted for 60% of the fund's inflows in 2009, enough to place UUP in eleventh place in net inflows for the year. The surge in assets caused the fund to halt creation for the second month in a row, as dollar bulls bought up the existing supply. Creation resumed on Jan. 5 following SEC approval for more shares, but the inflows have turned into outflows this year. Almost $500 million has exited the fund in 2010, or just over 25% of the net inflows from December, as the hot money heads for the latest action.
For all of 2009, SPDR Gold Shares ( GLD) captured the most investor dollars, with $13.8 billion in net inflows. It was followed by Vanguard MSCI Emerging Markets ( VWO), with $9 billion; iShares Barclays TIPS ( TIP), with $8.9 billion; US Natural Gas ( UNG), with $5.6 billion; and iShares MSCI Emerging Markets, with $5 billion. The flows reflect some of the major themes of 2009: gold ETFs, inflation, emerging markets, and the persistent attraction of UNG, despite the ETF being down 56.5% in 2009. Across the ETF universe, long U.S. equities were the leading destination for investor dollars in December, with $19.2 billion in inflows (more than half of which went to SPY). Long global-international was second, with $5.1 billion in inflows, followed by long fixed income, with $2.6 billion. Despite the huge inflows in December, long U.S. equity ETFs still saw $8.5 billion in net outflows for all of 2009. That compares to the $42.0 billion that flowed into long fixed income, the $35.6 billion that flowed into long global-international, and the $30.2 billion that flowed into long commodity ETFs. Again, these flows match the investment themes that were popular in 2009: inflation, emerging markets, and also fixed income. Inflation fears attracted money into precious metals and TIPS; a weaker U.S. dollar and rebounding economies drew capital into emerging markets; and investor shell shock, plus fears of another drop, led many investors into fixed income.
The outflow in XLE is interesting because oil prices increased in December, despite a mid-month decline, and it wasn't offset by large buying into other energy ETFs. Institutions appear to be using bond ETFs to play the yield curve, as there have been large flows in and out of different bond ETFs in recent months. For the year, SPY saw the largest net outflows, at $19.4 billion. Behind it was iShares MSCI EAFE ( EFA), which saw $4.0 billion in outflows. ProShares Ultra S&P 500 ( SSO) had outflows of $2.7 billion; iShares Russell 1000 Growth ( IWF), $2.2 billion; and SPDR Financial ( XLF), $1.8 billion. As mentioned above, investors sold out of long U.S. equity ETFs last year, but excluding SPY, the rest of long U.S. equity ETFs actually saw about $11 in net inflows.
Van Eck grew assets by 177%, the best of issuers starting 2009 with more than $1 billion under management. Direxion increased its assets by more than 400%, as traders were attracted to 3X leverage like moths to a flame, and the firm finished with about one-fifth of the assets of ProShares. Combined, the firms have close to 100% of the nearly $31 billion invested in short, leveraged short, and leveraged long ETFs. Overall, assets in ETFs increased 46% for the year. At the pace of growth seen during the last three months of 2009, assets will finish above $1 trillion by the end of 2010. -- Written by Don Dion in Williamstown, Mass.