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• April ETF Short Report: GLD Shorts Rise 83%
• March ETF Short Report: EEM Shorts Up 59%
• BlackRock’s iShares Tops $600B In Assets

• EEM 83% Rate It
• GLD 77% Rate It
• IEI 0% Rate It
• VWO 100% Rate It

Investors plowed more than $2 billion into the iShares MSCI Emerging Markets Index Fund (NYSEArca:EEM) in November, making it the most popular ETF last month, while its rival from Vanguard was among the 10 least popular funds in the latest twist in the battle for assets between the two huge ETFs .

Asset flows into and out of the world's two biggest ETFs focused on the developing world were turned upside down in early October when Vanguard said it planned next year to switch indexes on its Vanguard MSCI Emerging Markets ETF (NYSEArca:VWO) from the same MSCI benchmark EEM uses to one from FTSE. VWO suffered outflows of $887.5 million last month.

Overall, upward of $21 billion flowed into the exchange-traded fund market and total U.S.-listed ETF assets rose to $1.316 trillion, according to data compiled by IndexUniverse. That figure was 2 percent higher than in October, and 23.5 percent above the $1.062 trillion at the start of 2012 and the $1.065 trillion at the end of November 2011.

The strong flows last month were enough to offset a 0.5 percent decline of the Dow Jones industrial average, which retraced most of its early-month losses. The market became vulnerable early in November in the immediate aftermath of the U.S. presidential election as investors turned their attention to the U.S. 'fiscal cliff.'

That's market-speak for the damage the end of Bush-era tax cuts and a variety of spending cuts could do to the economy should those fiscal changes automatically kick in at the end of the year, as they are scheduled to. Only congressional action can change that outcome, and congressional inaction on the issue is precisely what the market fears.

Those fiscal cliff fears helped make certain bond funds appear near the top of our 'Top Gainers' list, including the iShares Barclays 3-7 Year Treasury Bond Fund (NYSEArca:IEI), which pulled in a bit more than $1 billion.

Gold also shined as politicians began difficult negotiations to keep the U.S. economy from flying off the fiscal cliff, with the SPDR Gold Shares (NYSEArca:GLD), the world's biggest bullion fund, gathering $718.8 million last month. It ended the month a $74.82 billion fund.

November 2012 Top Gainers

EEM Vs. VWO

As we've written here since Vanguard announced the VWO index change-and as some industry sources have been saying-it appears institutional investors are loath to part with MSCI indexes.

They are keen on benchmarking performance using MSCI indexes, and thus may be willing to gravitate to the much more expensive EEM as opposed to VWO. EEM has an annual expense ratio of 0.67 percent compared with 0.20 percent for VWO.

VWO ended up in the No. 2 spot on our 'Biggest Losers' table in November. VWO losing assets while EEM gathers them is a decidedly different story line than the one that has dominated the ETF world for the past few years.

Indeed, VWO surpassed EEM as the biggest developing markets fund in January 2011, largely because it was so much cheaper.

Where the current reversal of the previous trend ends is anyone's guess, though Vanguard is known generally as a money manager that caters more to retail, buy-and-hold, investors rather than institutional clientele, which suggests the current trend isn't likely to persist for a terribly long time.

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