Exchange traded fund investors demonstrated their higher appetite for risk in January by piling into ETFs focused on emerging markets and high-yield corporate bonds.
Vanguard Emerging Markets (NYSEArca: VWO) gathered the most assets last month with inflows of about $3.3 billion, Index Universe reports. Meanwhile, iShares MSCI Emerging Markets (NYSEArca: EEM) placed fifth, hauling in $1.3 billion.
The Vanguard emerging markets ETF was 2011’s top seller with inflows of $7.8 billion, according to data compiled by the ETF Industry Association.
Overall, U.S.-listed ETFs took in nearly $29 billion of inflows in January, according to the report.
Emerging market ETFs are off to a great start in 2012, more than doubling the return of the S&P 500 on improved sentiment on the global economy and speculation that multiples are too low. [Emerging Market ETFs Could Rally More on Economy, Valuations]
Investors frustrated with rock-bottom Treasury yields also jumped into corporate bond ETFs in January, particularly the high-yield sector. [ETF Chart of the Day: High-Yield Corporate Bonds]
The flows illustrate investors’ hunger for yield, and corporate bond ETFs have rallied on better U.S. economic data, low defaults and improved balance sheets.
Some portfolio managers say the asset class remains undervalued due to the overly pessimistic view on the economy and investors’ preference for U.S. government bonds. [High-Yield Bond ETFs in Favor]
Last month, iShares iBoxx High Yield Corporate Bond (NYSEArca: HYG), SPDR Barclays High Yield Bond (NYSEArca: JNK) and iShares iBoxx Investment Grade Corporate Bond ETF (NYSEArca: LQD) saw inflows of $2.2 billion, $1.4 billion and $1.1 billion, respectively, according to Index Universe. [ETF Focus: Corporate Bonds]
iShares iBoxx High Yield Corporate Bond
Full disclosure: Tom Lydon’s clients own VWO.