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April 16, 2013

Flows Into Exchange-Traded Products Hit a Fresh Record in the First Quarter of 2013


Net inflows into exchange-traded products hit a fresh high of $73.4 billion during the first quarter of 2013, pushing assets invested ETFs and ETPs to a new record of $2.09 trillion, according to data from ETFGI.

Large gains in many global equity markets fueled enthusiasm among investors for exchange-traded products, including exchange-traded funds (ETFs) during the first quarter, and have sent the assets invested in these fund vehicles globally to a high of $2.09 trillion, according to data provided by ETFGI, a London-based independent research and consulting firm that monitors trends in the ETF/ETP industry. Net inflows for the quarter totaled a record $73.4 billion, with ETFs and ETPs recording net inflows of $23.9 billion in March alone.

Equity products continued to dominate, both in March and for the first quarter as a whole, ETFGI noted, making up $62.5 billion of first-quarter net inflows. In contrast, flows into fixed income products attracted net inflows of $8.4 billion, ETFGI reported. Leveraged inverse funds — more structured funds used as hedges and with leverage added to boost returns, pulled in some $3.5 billion. Meanwhile commodity ETFs and ETPs experienced the largest net outflows as investors responded to the downward trend in the broad commodities market by pulling out a net $7.9 billion from these investments.

“The increasing number of institutional investors globally using ETFs and ETPs is an important factor driving the growth in net new asset flows as well as the growth in total assets under management,” said Deborah Fuhr, managing partner at ETFGI. “Our analysis of reported share ownership of ETFs ETPs, using our Share ownership database, has found that the number of institutional investors that have used ETFs and ETPs globally has grown at a compound annual rate of 8.9% in the five years to 2011.”

As of the end of the first quarter, ETFGI calculated that there were 4,778 ETFs and ETPs in existence, offered by 209 providers and trading on no fewer than 56 different exchanges. During the first quarter, overall assets invested in exchange-traded vehicles have risen by 7.3% from year-earlier levels of $1.95 trillion to $2.09 trillion.

Investor interest in specific types of exchange-traded products tended to mirror broad market trends. Just as investors in bonds and bond mutual funds have emphasized the quest for yield, so high-yield bond ETFs and ETPs gathered the single largest portion of net inflows into bond-related products, accounting for $2.6 billion of the $8.4 billion total in the first quarter. They were followed by corporate ETFs and ETPs, which attracted some $2.4 billion, while government and corporate bond products pulled in another $2.4 billion during the period. Investors remained averse to the ultra-low yields offered in money markets, pulling $810 million out of this category of exchange-traded products. Similarly, ETFs and ETPs providing exposure to precious metals experienced the largest net outflows from amongst commodity-related exchanged-products — a total of $8.5 billion for the first quarter. While investors fled funds that emphasized a single category of commodities, they did continue to put money to work in broad commodity ETFs and ETPs, which gathered net inflows of $1.4 billion in the quarter.

As of the end of the first quarter of 2013, the three largest providers of exchange-traded vehicles continue to dominate the market: together, iShares, SPDRs and Vanguard make up 69.5% of all global assets invested in these products. As of the end of March 2013, iShares was in the lead, with assets of $809 billion and a market share of 38.7% dwarfing the $365 billion invested in SPDRs products. Meanwhile, of the index providers whose products are tracked by these ETFs and ETPs, S&P Dow Jones is in the lead, with $545 billion invested in funds tied to its indices and a market share of 26.1%, while runner-up MSCI has $442 billion in assets invested in its funds and a 21.2% market share.

For more insight into the state of the global ETF market, including complete year-to-date data and insight into trends in all geographical regions, please see this report from ETFGI.

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