Investors have plowed money into exchange-traded funds tracking bonds and international stocks this year, and the pattern looks set to continue in 2010.
Through the end of November, taxable-bond ETFs had net inflows of more than $32 billion, the most among the major asset classes, according to investment researcher Morningstar. After the credit crunch, more investors are playing defense with bonds.
Broad-based bond ETFs such as iShares Barclays Aggregate Bond Fund (trading symbol: AGG) and Vanguard Total Bond Market ETF (BND) are popular options for blanket exposure to fixed-income markets.
Other popular ETFs in 2009 focused on inflation-protected Treasurys, gold, corporate bonds, emerging markets and bearish funds that bet against the market and specific sectors.
ETFs are baskets of securities that trade on exchanges like inidual stocks, and they are giving traditional mutual funds stiff competition. Investors like the transparency, liquidity, low costs and tax efficiency of ETFs.
As the year draws to a close, here is a list of trends to watch in the ETF business for 2010:
• Bonds: Fixed-income ETFs are late arrivals to the scene, relative to stock funds, but they have been making up for lost time.
As of Nov. 30, there were 802 ETFs in the U.S. overseen by 30 managers and a record $739 billion in total industry assets, according to State Street Global Advisors. Of these, 79 were fixed-income ETFs, but they held …
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