ETF Expert

According to Murray Coleman at Index Universe, U.S. ETFs had net inflows of $8 billion in March. If you follow the money, most of it went to commodities, fixed income and emerging markets.

$4.6 Billion alone went into SPDR Gold Shares (GLD). And yet, GLD actually lost -2.5% for the month of March. Were investors late to the gold rush?

A similar phenomenon could be seen in fixed income vehicles like the iShares Investment Grade Corporate Bond Fund (LQD).  It picked up nearly $1 billion in new assets, yet the fund was basically flat in the appreciation department.

There's even a bit of irony with regard to what investors passed on. The S&P 500 SPDR (SPY) lost nearly $7 billion in assets. That wasn't as bad as the $23 billion net outflow that left in February. Nevertheless, SPY was actually up 8.5% in March.

It'd be tempting to say that investors have gotten it wrong… that they were late to the "protect-at-all-cost" party. It might be tantalizing to suggest that they became too conservative with their gold safe haven investing and their desire for fixed income… as theybailed from the U.S market benchmark in SPY. However, I don't believe that's what's happening across the board.

Consider the surging inflows of $1.5 billion into the iShares Emerging Market Fund (EEM). Percentage-wise, it may be a 5%-10% increase via asset inflow over February. Moreover, EEM popped nearly 17% in price during the month of March.

In the same vein, the Powershares Nasdaq 100 (QQQQ)  may have increased its assets via inflow by roughly 5%-10% as well. Its March price gains were a stellar 10.3%. And then there's approx $750 million that went into the iShares S&P 500 (IVV), even as money left the seemingly identical SPY.

The way that I see it… investors may be expressing a belief that emerging markets will recover faster than the developed ones in Europe or the U.S. Yet, they are offsetting some ofthe risks with investments that are perceived to be safer havens against U.S. economic hardship and dollar devaluation. It follows that investment grade corporate bonds are gaining in popularity… and that people can't seem to get enough of the yellow metal.

It also may be a form of the old barbell approach. One fills up on the conservative stuff on one side of the barbell. There, one picks up investment grade corporates or inflation-protected securities. Then you forgo the S & P 500 SPDR (SPY), Japan (EWJ) and Europe AustralAsia'sEAFE Index (EFA). But… you load up on countries like Brazil (EWZ) and emerging market proxies like EEM.

Emerging markets first out of the global recession? Barbell portfolios? There's also the probability that traditional mutual funds have been losing business to the ETF world.

There's still one more possibility that relates to the current net inflows; that is, the reflation trade favors inflation-protectionvia TIPs, WIPs, commodities and resource-heavy emerging markets.

Indeed, investors can't seem to get enough of commodities… period! Powershares DB Agriculture Fund (DBA) picked up about 3% in March. More impressively was investor interest, as the fund may have increased it's assets under management via inflow by 25%. The total commodity basket, PowerShares DB Commodity Fund (DBC) appears to have increased its asset based by 20% in the month.

If you'd like to learn more about ETF investing… then tune into "In the Money With Gary Gordon." You can listen to the show "live" or via podcast or on your iPod at this link.

Disclosure Statement: ETF Expert is a web log ("blog") that makes the world of ETFs easier to understand. Pacific Park Financial, Inc., a Registered Investment Advisor with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.