Assets of exchange-traded funds continue to surge, fueled by strong interest in international and country ETFs and by new fund introductions.

By the end of July, ETFs assets reached $178 billion, up an impressive 18% from $151 billion at the start of the year, according to the Investment Company Institute. The figures exclude HOLDRs, which would push the total close to $200 billion. In comparison, mutual funds grew only 1% during the same period, says the ICI. ETFs have recorded growth rates above 20% every year since their creation over a decade ago.

This is occurring despite tepid growth of 5% in the largest and oldest ETF, the SPDRs 500 (AMEX:SPY), and despite hemorrhaging assets in the second largest fund, the NASDAQ-100 (AMEX:QQQ). Other large funds, however, showed phenomenal growth rates, especially among the iShares Russell line of US equities. Funds with the largest flows in or out during Q1 and Q2 of 2004 are as follows:

 

Fund	Ticker	Fund Inflows	% of Fund Total
Total Stock Market VIPERs	VTI	$586	19%
Diamond Trust	DIA	$937	13%
NASDAQ-100	QQQ	$-3,486	-16%
iShares S&P 500	IVV	$1,259	13%
SPDRs 500	SPY	$2,172	5%
iShares DJ Select Dividend	DVY	$1,927	76%
iShares Russell 2000	IWM	$1,672	31%
iShares Russell 1000 Growth	IWF	$545	26%
iShares S&P 500/Barra Value	IVE	$605	29%
iShares Russell 1000 Value	IWD	$789	26%

Major US market equities ETFs as a whole showed only 6% growth, but US style and niche ETFs rocketed up. Category breakdowns in the first half of 2004, excluding HOLDRs, are as follows:

 

Category	2003 Year End Assets ($ Millions)	June 2004 Assets ($ Millions)	Growth
US Broad-based	$114,049	$127,547	12%
US Sector/niche	$18,283	$22,013	20%
International	$13,984	$22,268	59%
Bonds	$4,667	$6,709	44%
Total	$150,983	$178,537	18%

Even as the older ETFs slowed, new funds were very well received and investors seemed eager for small, niche market ETFs. Clearly ETFs are being used by sophisticated investors in every aspect of portfolio construction.