The Federal Reserve has taken dramatic monetary actions over the past few years. Between several quantitative easing programs and a zero interest rate policy, the central bank is causing the financial landscape to make historic changes.
Due to unforgettable market events such as the dotcom bubble, housing collapse and the flash crash, many people are hesitant to invest in the volatile stock market. However, centrally-planned lower interest rates are driving some savers and investors looking for higher returns into equities. With expense fees and lackluster returns by fund managers in focus, dollars are being placed into exchange traded funds at record numbers.
Last year, investors placed a record $188 billion into domestic-listed ETFs, topping the previous record of more than $175 billion in 2008, according to data compiled by IndexUniverse. Total ETF assets finished the year at nearly $1.35 trillion, representing a 27 percent surge from the prior year. In comparison, total ETF assets equalled about $540 billion at the end of 2008.
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Dave Nadig, IndexUniverse Director of Research, explains, “2012 was the strongest year ever for ETFs, and for good reason. Investors are realizing that the old high-cost, low-transparency mutual fund world makes less sense than ever. ETFs keep delivering on their core promises of low cost, good exposure, tax efficiency and liquidity.”
Out of the $188 billion in 2012 inflows, about 80 percent of the total came from the three biggest firms: BlackRock’s iShares, State Street Global Advisors and Vanguard.
Here’s a look at the top five ETFs according to fund flows…