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December 10, 2012

Inflows Into ETFs and ETPs Resume as Uncertainty Diminishes


Despite a bumpy beginning to the month, by the end of November, assets in exchange-traded funds and other exchange-traded products had hit a record $1.9 trillion, according to data provided by ETFGI.

With at least some sources of market uncertainty removed, investors resumed investing in exchange-traded funds (ETFs) and products (ETPs) during November, contributing net new assets of $21.3 billion to these securities over the course of the month. That propelled assets in ETFs and ETPs to an all-time high of $1.9 trillion, with the lion’s share of that – or $1.3 trillion – invested in ETFs/ETPs in the United States. Another $359 billion is invested in Europe, $78.7 billion in Asia Pacific (ex-Japan), $46.9 billion in Japan and $11.6 billion in Latin America, according to ETFGI, a Londdon-based independent research and consulting firm covering the ETF/ETP industry. November’s jump in assets under management brings the year-to-date total globally to $1.9 trillion, up from $1.5 trillion (or 23.8% higher) over the course of 2012.

With the outcomes of the US elections and super storm Sandy known, and a sense among investors that a solution to the looming fiscal cliff will be negotiated, US$9 billion was invested into ETFs and ETPs providing exposure to US equity indices, reversing nearly all of the outflows during October. Overall, US$ 21.3 billion of net new money went into ETFs and ETPs in the month of November. Looking year to date through end of November 2012, ETFs and ETPs saw net inflows of US$223 billion, US$69 billion above the level of net new assets at this time last year. Equity ETFs and ETPs have gathered the largest net inflows accounting for US$127 billion followed by fixed income ETFs and ETPs with US$61 billion and commodity ETFs and ETPs capturing US$22 billion.

“We are likely to end 2012 with a record level of assets in ETFs and ETPs,” said Deborah Fuhr, managing partner at ETFGI. Fuhr also predicted that net inflows into these products would end the year on a record note.

November’s $9 billion of net inflows into ETFs and ETPs providing exposure to U.S. equity indices reversed nearly all of the outflows experienced during October, ahead of the U.S. elections and while the “superstorm”, Hurricane Sandy, was threatening and then wreaking havoc on the U.S. Northeast. With those events behind us, and a degree of confidence in the financial markets that the Obama administration and Congress will succeed in negotiating a solution to the looming fiscal cliff, investors clearly had more confidence in establishing positions tied to the U.S. market.

Overall, November witnessed net new inflows of $21.3 billion into ETFs and ETPs worldwide during the month of November, bringing the total net inflows as of the end of that month to $223 billion for 2012. That is $69 billion ahead of last year’s pace at the same time in 2011. Equity-linked ETFs and ETPs continue to attract the largest net inflows, accounting for $127 billion of the total, $36 billion more than they did during all of 2011. Once again, those exchange-traded vehicles giving investors exposure to North American stock markets have proved to be most popular, attracting $62 billion, or nearly half of the total equity allocation. Emerging market equity-lined ETFs and ETPs have won an additional $38 billion so far this year, while those offering exposure to Asia Pacific equities have pulled in another $9.6 billion of assets.

Fixed Income ETFs and ETPs have proven to be very popular among investors this year, pulling in net new assets of $61 billion by the end of November. That eclipses last year’s total inflows by $16 billion. Within this category, investment-grade corporate bond products continue to dominate, gathering $24.5 billion, followed by high yield with net inflows of $14 billion.

Uncertainty and volatility within financial assets has revived investor interest in commodities, and that is reflected in the year-to-date inflows into commodity ETFs and ETPs, which stand at $22.5 billion, $5.5 billion ahead of this time last year. Precious metals have attracted the lion’s share of these net inflows, or a total of $19.8 billion; products tied to agricultural commodities witnessed the largest net outflows, totaling $1.4 billion.

Over the last 10 years, ETFs and ETPs have boasted a global compounded annual growth rate of 30.2%. As of the end of November, there are 4,726 ETFs and ETPs traded on 56 separate exchanges worldwide.

For more insight into the state of the global ETF market, including complete year-to-date data, insight into trends in all geographical regions and notes on which ETF and ETP providers are leading the pack and which are seeing outflows, please see this report from ETFGI.

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