BlackRock’s exchange-traded funds business, iShares, led the global ETF industry in 2015 by winning $130bn in new flows, representing a 13% annual organic growth rate, according to a statement from the firm.
Mark Wiedman, Global Head of iShares at BlackRock.
The ETF giant – the firm has more than $1 trillion in ETF assets – set new growth records in the US ($97 billion vs. $82 billion in 2014) and Europe ($34 billion vs. $20 billion in 2014), and won 42% of flows in both markets. The overall industry expanded at a record-breaking $347bn in 2015.
Commenting on the numbers, Mark Wiedman, Global Head of iShares at BlackRock, said: “Despite lacklustre equity markets in 2015, the global ETF industry set a new growth record of $347bn. Institutional and retail investors are using ETFs more and more, whether as tools to express a view on almost any financial market, or for long-term core investments.”
Bond ETF flows were particularly strong, growing at 22% annual organic growth rate globally, as more investors embraced the ETF structure to access fixed income markets at known, transparent prices and with impressive liquidity. iShares won $50bn globally, 54% of all new flows into bond ETFs.
Investors also increasingly used ETFs as substitutes for futures and swaps. According to Wiedman, “institutional investors accelerated the use of ETFs as substitutes for futures and swaps in 2015. As banks’ balance sheet costs have ratcheted up, so too has the cost of using futures and swaps. ETFs are now typically a more efficient substitute for major global equity indices and for bond indices like credit derivatives. For instance, S&P 500 futures averaged 56 bps over the last year, while our iShares Core S&P 500 ETFs in the US and Europe (LN: CSPX) only cost 7 bps.”
iShares also achieved impressive growth numbers in Europe, where it remains the largest provider of ETFs by AUM.
Rachel Lord, Head of EMEA iShares at BlackRock, said: “ETF uptake amongst European investors shows no sign of abating. Our 2015 net inflows reached $34bn, accounting for 42% of the industry flows in the region. This was largely driven by investors seeking fixed income and European equity exposures.
“Over the course of the year, we established a variety of product and distribution partnerships with private banks, brokerage firms and wealth managers across the region – a strong indication that advisers and asset allocators are increasingly looking to ETFs as the most cost-efficient, flexible building blocks for their client portfolios, in a fee-based environment.
“Underlying these developments has been an ongoing commitment to making the financial ecosystem on which ETF trading relies as effective as possible. This has included transitioning more of our funds onto the international clearing and settlement system we pioneered to reduce frictional costs of trading, and working with platform providers to make access to ETFs easier for retail investors.”