Here's the main stat:
U.S. Stocks Flows (2012)
- Mutual Funds: $127 billion Outflows
- ETFs: $54 billion Inflows
That's right: money keeps coming out of stock mutual funds, but there are still inflows into equity ETFs.
Why? Because active management doesn't work well in the equity space, Hougan tells me. There are no superstars remaining in it. If indexing makes more sense, than ETFs are the low-cost providers.
What about bond funds? Money keeps rolling in to both mutual funds and ETFs:
Taxable Bonds: Money Rolling In (2012)
- Mutual funds: $242 billion Inflows
- ETFs: $51 billion Inflows
No signs of that bubble bursting-yet.
What about ETFs and the "fiscal cliff?" Hougan insists that ETFs have benefited from the concern over higher taxes. Tax rates are going up, particularly on capital gains and ETFs are a more tax efficient vehicle than mutual funds.
We are also seeing tax gain selling to lock in lower tax rates this year; that means more money that is "trapped" in mutual funds can be "liberated" and redeployed elsewhere.
What's hot in ETFs for 2013?
Hougan is watching money move into international debt. One fund he watches: Market Vector Emerging Markets Local Currency Bond (EMLC), which invests in emerging market bonds in local currency.
How about the quest for dividends, so hot earlier this year? Hougan says it's still hot, with money going into the Global X SuperDividend ETF (SDIV), which invests in the 100 highest dividend paying securities in the world, market-cap weighted. Current yield: 7.5 percent.
(Read More: Why BofA Thinks Stocks Will Hit New High in 2013