Click here for Futures 2010 ETF Guide.

In 2008, the exchange-traded fund (ETF) industry experienced its first major fall in assets since the first ETF began trading in 1993. According to the Investment Company Institute (ICI), a national association representing U.S. investment companies, in November 2008, U.S. ETFs held combined assets of $478 billion, a significant drop from the November 2007 level of $572 billion.

In 2009, however, equity markets around the world recovered. Massive government spending designed to shore up the world economy took hold and liquidity flooded the marketplace. ETFs attracted a major slice of the growing pie, swelling to new heights by mid-year and climbing to well over $700 billion in combined assets by year-end (see “Call it a comeback").

The ICI reports that ETF assets increased $246 billion in 2009. That was a rise of 46.3% since December 2008. Domestic equity ETFs attracted a major chunk of those funds, increasing by $100 billion since December 2008. Global equity ETFs, which took the brunt of the cash exodus that occurred in 2008, recovered by $96 billion in 2009. As of the end of December 2009, bond funds held $107 billion and hybrid funds held $169 million (see “On the uptick”).

Futures’ ETF Guide includes all ETFs that traded more than 100,000 units a day, on average, during the last quarter of the previous year. Based on that period in 2009, 294 ETFs made the cut (out of more than 790 available at the end of the year). Based on 2008 numbers, 273 ETFs were included in the Guide.
However, while both assets under management and the number of available ETFs rose, volumes fell, in some areas significantly. In the 2010 guide — based on the numbers from the last quarter of 2009 — the average daily volume of all ETFs listed was 4.5 million units. In the 2009 guide, the average daily volume for the ETFs that made the 100,000 limit was 6.5 million.

2009 TRENDS
ETFs, and the even the language used to describe them, continue to evolve.

One ETF sector that continues to shift with the times is commodities. Commodity-linked ETFs saw some significant moves, reflecting investor appetite for risk and reward in various markets. The last quarter of 2009, the most popular commodity-linked ETF was the United States Natural Gas (UNG) ETF, which was booking an average daily volume of nearly 30 million units a day. The previous year’s leader, the Energy Select Sector SPDR (XLE) ETF dropped to third on the list to under 19 million units a day. In 2008, XLE closed out the year with an average daily volume of 48 million units.

Some major shifts also occurred in international and emerging market ETFs. Although the top ETF in this sector, the iShares MSCI Emerging Markets Index (EEM) ETF, remained the same, it fell significantly in average daily volume, logging about 71 million units a day to close out 2009 vs. more than 127 million units a day in 2008. However, the iShares products continued to hold strong, claiming nine of the top 10 spots in this category. In 2009, as it was in 2008, only the Vanguard Emerging Markets Stock (VWO) ETF was able to break their hold, coming in seventh, trading 10 million units a day in 2009.

Still, the biggest issues in the ETF industry stayed the biggest, although with significant volume drops. The popular Standard & Poor’s Depository Receipts (SPDRs, pronounced “spiders,” which track the S&P 500) fell to just over 160 million units a day in 2009 vs. roughly 439 million the year before. The QQQQs (pronounced “Qs,” which track the Nasdaq 100) also experienced a drop, falling to 86 million units a day from about 227 million in 2008.