Competing aggressively on price helped Vanguard to grab first prize as the fastest growing US exchange traded fund provider of 2010, pushing BlackRock, the long-time leader for investor inflows, into second place, according to data just released by the National Stock Exchange.

Vanguard's ETF business gathered $40.5bn in new cash in 2010 with investor inflows rising for a fifth year in succession.

In contrast, BlackRock's ETF inflows dropped for a third year in succession, down 28.2 per cent to $30.2bn in 2010.

Vanguard will view the shift as a resounding vindication of its decision to cut the charges on its emerging markets ETF, a move which has fuelled an escalating price war among US exchange traded fund providers.

After gathering $19.3bn in new cash from investors last year, Vanguard's MSCI emerging markets ETF took top spot as the most popular ETF of 2010 with its inflows vastly outpacing those of the rival iShares emerging markets ETF which slumped to $2.3bn.

Inflows into the State Street's SPDR Gold Trust, the most popular ETF of 2009, saw inflows drop from $13.8bn to $5.8bn last year.

Price competition also played a part in the slowdown in inflows for the SPDR Gold Trust after charges on a rival product, the iShares Gold Trust were cut by BlackRock in June. The iShares Gold Trust attracted inflows of $1.6bn last year, up from $0.4bn in 2009.

In spite of the drop in new investor inflows, BlackRock retained its position as the largest US ETF provider with assets of $448bn at the end of 2010, up 20.2 per cent on the previous year.

Meanwhile Vanguard cemented its hold on third place with its assets surging 61.5 per cent to $147.9bn, behind State Street whose assets increased 24.2 per cent to $234.7bn.

Behind the three behomoths of the US ETF industry, the National Stock Exchange data also showed some of the recent entrants to the market gaining significant momentum in 2010.

ETF Securities, Charles Schwab, Pimco, GlobalX, new entrants to the US ETF market in 2009, each attracted more than $1bn in new inflows last year.

The ongoing broadening of the US ETF market was further illustrated by the fact that 14 providers gathered inflows of more than $1bn in 2010, up from 10 in 2009.

Meanwhile just seven providers (from a total of 49) saw net outflows from their US based ETFs.

One of the biggest losers was US Commodity Funds, which runs the US oil and US natural gas ETFs. It saw outflows of $977m, a marked contrast to 2009 when it gathered $5.8bn.

In aggregate, US ETF providers attracted $118.7bn from investors last year, almost matching inflows for 2009 at $119.4bn but well down on the $175.7bn recorded in 2008.

Investors appear to have rediscovered their appetite for domestic equities as inflows into long US equity ETFs rebounded to $37.4bn in 2010 after registering outflows of 7.1bn in the previous year.

However, this came at the expense of fixed income ETFs where inflows dropped from $42bn in 2009 to $26.2bn last year.

Investors willinginess to bet on further gains for commodities also weakened with inflows into long commodity ETFs falling from $30.2bn in 2009 to $11bn last year.

Reflecting the ongoing problems in the US property market, long real estate ETFs remained unloved with inflows down to $2bn last year from $3.1bn in 2009.
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