Global ETF assets hit the $1 trillion mark at the end of December, a milestone long expected by industry insiders.
This investment product rapidly emerged as a competitor to the $7 trillion mutual fund industry. Last year, global ETF assets rose a whopping 45.2% from the $710.9 billion in assets at the end of 2008, according to the latest research from BlackRock.
This means, of course, that the wild volatility of last yearwas good for the ETF industry. As investors’ risk aversion grew during the tumultuous first quarter, they sold much of their equity ETF positions, most notably in Asian and global equities. But once the market hit bottom in the beginning of March, dollars came rushing back into these sectors—and investors turned to the liquidity and transparency ETFs offer to gain exposure. Flows into ETFs were heaviest into corporate bond, inflation-protection, commodities and international and emerging market indices last year.
At the end of December, there were 1,939 ETFs worldwide with 3,775 listings from 109 providers on 40 exchanges. The U.S. ETF industry also grew year-over-year at a rate of 41.9% last year, with 28 providers offering 772 ETFs on two exchanges.
Nine companies began offering ETFs last year, entering a market long dominated by a handful of large providers, as the total number of funds increased last year by 10%. New names mean even more new products—but will that translate into new assets?
“With Pimco getting more involved in the ETF business and with Vanguard looking to offer additional ETFs, we’ve got some big names here that are going to become more prominent in the ETF world,” said Tom Graves, equity analyst at Standard and Poors. “And while I would expect providers like Barclays and State Street to remain market-share leaders in the U.S. for the foreseeable future, we’ve got some other big names coming in now that will have marketing and education efforts that will really help to encourage the shift toward ETFs.”
In December, BlackRock Inc. completed its $13.5B acquisition of Barclays—a longtime leading ETF provider with its iShares products—to become the largest provider of ETFs in the industry. BlackRock’s ETF business increased 44.5% to $114.7B last year, and already this year, BlackRock has started to introduce new ETFs.