May ETF Asset Report: U.S. and Japan Prevail, Gold Suffers - ETF News And Commentary

The ETF industry has seen solid asset growth in May as global markets, and especially the U.S., continued the upward trend. However, at month end, the market started to show volatility, which has been felt in the early part of June as well.

Funds like SPDR S&P 500 ( SPY ) and WisdomTree Japan Hedged Equity ( DXJ ) were the highest asset gatherers in the month. With improving U.S. economic indicators, the S&P 500 advanced around 3.0% during this time period, which helped raise interest in the following funds:

Top Gainers May 2013 ($, Million)

Ticker Fund Inflows ($ , mil) AUM ($, mil)
SPY SPDR S&P 500 3,295.83 138,506.84
DXJ WisdomTree Japan Hedged Equity 2,385.04 9,900.70
IEI iShares Barclays 3-7 Year Treasury Bond 1,611.72 3,850.30
XLF Financial Select SPDR 1,537.95 13,940.42
EWJ iShares MSCI Japan 1,214.87 11,230.20

*Source: Indexuniverse

Meanwhile, yields on the 10-year Treasury rebounded from its record low and currently stand above 2%. This suggests that investors are certainly buying into concerns over the Fed tapering off the monetary stimulus program (Read: Long-Term Treasury Bond ETF Investing 101 ).

Meanwhile, on the other side of the world, Japan's target of 2% inflation backed by an easy monetary policy led to a surge in its equity market which suffered low growth and deflation for a long time. Japanese equities got a solid boost post leadership changes.

The pace of inflow into Japanese stock ETFs this year is already more than double the levels seen in 2012 and 2011, suggesting that investors are certainly buying into these new policies. However, June has seen significant volatility-and losses-for the Japanese equity market, so we may see a bit of a reversal in these figures starting at the next monthly asset report.

Top Winners

In May, the SPDR S&P 500 ( SPY ) was the top asset gatherer, hauling in around $3.3 billion. This fund tracks the S&P 500 Index and such a huge inflows suggests optimism around the broader US market as the S&P 500 Index is considered a good proxy for the U.S. stock market. SPY manages an asset base of around $139 billion and charges 9 bps in fees and expenses.

The runner up was WisdomTree Japan Hedged Equity ( DXJ ) tracking the Japan Hedged Equity Index. This fund saw an inflow of around $2.4 billion and has amassed around $9.9 billion. With about 275 stocks in its basket, DXJ charges 48 bps in fees. The fund has considerable exposure in Industrials, Consumer Discretionary and Information Technology (Read: DXJ--Best ETF to Play the Japan Rally ).

In order to tap Japan's growth story, investors also poured money into another Japan oriented fund iShares MSCI Japan Index Fund ( EWJ ) which accumulated $1.2 billion assets last month to reach a total of $11.2 billion.

However, we expected the Japanese equities to lose their winning momentum in the coming month as the US dollar witnessed its largest single-day decline in three years against yen in the first week of June.

Another ETF - iShares Barclays 3-7 Year Treasury Bond ( IEI ) tracking the Barclays Capital U.S. 3-7 Year Treasury Bond Index - was a top gatherer in May. As much as $1.6 million flocked into the fund thanks to its lower risk profile and minimum worries over interest rate risks.

Top Losers

Not all funds saw as much interest in the month. There are also funds which lost assets considerably in May. These inlude:

Biggest Losers May 2013 ($, Million)

Ticker Name Outflows AUM ($, M)
GLD SPDR Gold -2,945.81 45,403.87
EEM iShares MSCI Emerging Markets -1,976.86 41,780.47
XLV Health Care Select SPDR -1,040.07 7,051.52
IWM iShares Russell 2000 -1,016.66 21,068.67
UWM ProShares Ultra Russell 2000 -987.34 146.45

*Source: Indexuniverse

The SPDR Gold Shares ( GLD ) tracking Gold Bullion has seen around $3 billion in outflows and stood at $45.4 billion in assets at the end of the month; down 11% sequentially. The product has been downbeat since the beginning of the year. Growing optimism surrounding the U.S. economy and some remedial measures taken in Eurozone shifted investors' attention from the physical asset ETF to equity markets (Read: Have We Seen the Bottom in Gold ETFs? ).

iShares MSCI Emerging Markets ( EEM ) fund, tracking the MSCI Emerging Markets Index, saw asset drainage of about $2.0 billion to $42 billion in May. A focus on the domestic recovery along with concerns of slower growth in some emerging markets like China, Brazil might have resulted in assets gushing out of the fund.

HealthCare Select Sector SPDR ETF ( XLV ) tracking the Healthcare Select Sector Index lost about $1.0 billion in assets in the May. Still, health care has been a strong performer, and this losing trend may not continue, especially if investors can look past Obamacare uncertainties.

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WISDMTR-J HEF (DXJ): ETF Research Reports

ISHARS-EMG MKT (EEM): ETF Research Reports

SPDR-GOLD TRUST (GLD): ETF Research Reports

ISHARS-BR 3-7TB (IEI): ETF Research Reports

SPDR-SP 500 TR (SPY): ETF Research Reports

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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