ETF Scorecard for December and 2009

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.

Inflows

Judging by fund flows, ETF investors made diversified bets in December, but the plain vanilla SPDR S&P 500 ( SPY) garnered the largest net inflows, at $11.6 billion. It was followed by UUP, which had $1.8 billion in net inflows; iShares Russell 2000 ( IWM), with $1.6 billion; Vanguard MSCI Emerging Markets ( VWO), with $1.2 billion; and SPDR Utilities ( XLU), with $1 billion.

Emerging markets remained a favorite destination of investors. In addition to the flows into VWO, iShares MSCI Emerging Markets ( EEM) saw $941 million flow into the fund. Also, iShares Barclays TIPS ( TIP) was still a favorite, with the eighth largest inflows in December, at $756 million.

IWM and XLU were two rebounding ETFs. Small caps, which lagged in the autumn, turned around in December, while utilities, which were laggards for the whole year, also staged a year-end rally.

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.

Outflows

iShares Barclays 7-10 Year Treasury ( IEF) led the net outflows in December, as $900 million left the fund.

It was followed by SPDR Energy ( XLE),with $535 million in net outflows; Vanguard MSCI LargeCap Value ( VTV), with $455 million in outflows; Vanguard MSCI Small Cap Value ( VBR), with $300 million in outflows; and ProShares UltraShort S&P 500 ( SDS), with $296 million in outflows.

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.

Issuers

After several months of big inflows, Vanguard saw inflows fall from about $5.4 billion in November to $1.9 billion in December, good for fourth place behind the $15.2 billion into State Street, $3.2 billion into Invesco/PowerShares and $6.8 billion into Blackrock.

In 2009, State Street was hurt by the large outflows from SPY, and the firm ranked seventh in net inflows. The top three asset gatherers for the year were Blackrock, Vanguard and Invesco/PowerShares, with $42.1 billion, $28.1 billion, and $11.1 billion in inflows, respectively.

Last year was interesting because it began in the midst of the worst bear market in a generation, but transitioned into quite an impressive rally. Vanguard was able to double its assets under management during the year, and the firm separated itself from the middle-sized issuers, though it still has about half the assets of State Street and about one-quarter of the assets of Blackrock.

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.

At the time of publication, Dion Money Management owns iShares Barclays TIPS.

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.

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