Assets held in domestic exchange-traded funds reached a record $995 billion at the end of last year.
Net new inflows exceeded $100 billion for the fourth consecutive year, according to a report from State Street Global Advisors. Emerging markets and fixed income were the fastest growing categories.
According to State Street Global Advisors, the new money was broadly distributed among asset classes.
Tom Anderson, global head of ETF strategy and research at State Street Global Advisors, predicts that investors will use ETFs to buy high-dividend paying stocks and generate steady income.
In a separate report from Cogent Research, the proportion of investors who report owning ETFs increased from 7% to 11% between 2006 and 2010. According to cogent, this is in stark contrast to the declining number of investors who report owning mutual funds.
“These numbers reflect a dramatic shift in preference among investors for both mutual funds and ETFs,” said John Meunier, a principal at Cogent. “And while it’s impossible to know exactly how things will play out, it’s clear that a major realignment is underway.”