Data from the latest monthly ‘ETFGI Global Industry Insights’ report published by ETFGI, a London-based research and consulting firm covering the global exchange-traded fund (ETF) and exchange-traded product (ETP) industry, reveals that global assets invested in ETFs and ETPs at the end of August reached an all-time high of over $1.7 trillion.
Global assets invested in ETFs and ETPs have reached an all-time high of over $1.7 trillion, according to data published by ETFGI.
Over the past 10 years, the compound annual growth rate of these products globally has been 26.5%. There are currently 4,713 ETFs and ETPs, with 9,620 listings, assets of $1,762 billion, from 204 providers on 56 exchanges.
The challenging market conditions currently and over the past few years, combined with the difficulty in finding active managers that consistently deliver alpha, have caused investors to embrace the use of ETFs and ETPs. ETFs provide greater transparency in relation to costs, portfolio holdings, price, liquidity, product structure, risk and return compared to many other investment products and mutual funds.
ETFs are used widely by institutions and increasingly by financial advisors and retail investors for a range of purposes. These purposes include equitising cash; creating core/satellite portfolios; implementing short-term tactical adjustments to portfolios; gaining long-term strategic exposure; and hedging.
“In a world where investment products come and go in the blink of an eye, ETFs have proved that they are here to stay and might be considered one of the most innovative financial products in the last two decades. They are one of the few products that are offered on the same terms to both retail and institutional investors” said Deborah Fuhr, Managing Partner at ETFGI. “Market volatility may be making investors wary about the stock market, but they continue to find exchange-traded funds and other exchange-traded products useful tools.”
Capital flows this year within ETFs also demonstrate how these products have become important indicators to gauge shifts in investor sentiment between and among asset classes. In the eight months to the end of August 2012, ETFs and ETPs saw net inflows of $143 billion, which is $23 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 $76 billion, followed by fixed income ETFs and ETPs with $47 billion and commodity ETFs and ETPs capturing $10.5 billion.
Fixed Income ETFs and ETPs have also proven to be very popular this year, with $47 billion in net new assets, $1 billion more than the total new assets they received last year. Within the fixed income universe corporate bond products have gathered the largest net inflows with $18.5 billion, followed by high yield products with $11 billion and broad/aggregate bond exposures with $4.9 billion.
Equity-focused ETFs and ETPs have gathered $76 billion, $7 billion more than this time last year. Products providing exposure to the United States/North American equities have gathered $39 billion, followed by emerging market equity with $22 billion and Asia Pacific equity with $7 billion.
Commodity flows at $10.5 billion are slightly lower than this time last year. Precious metals have gathered the largest net inflows with $9.5 billion, followed by broad commodity with $1.3 billion and energy with $901 million. Agriculture experienced the largest net outflows at $1.2 billion.