ETPs/ETFs listed globally reached $2.64 trillion in assets, a new record high, at the end of Q2 2014, according to analysis at ETFGI. In the past two years the assets invested in ETFs/ETPs have increased by nearly $1 trillion or 57% from the $1.68 trillion at the end of the first half of 2012.
The potential for absolute growth in index, smart beta and active ETFs and relative growth when compared to mutual and hedge funds means many asset managers are considering how they should participate in the ETF industry. This comes as existing ETF managers are looking at how they might expand to new jurisdictions globally. The options traditional managers can pursue include: the level of resources and time required to participate in the ETF industry is greater as you move down the list of options
* Become an assembler of products that use ETFs: requires little additional resources and time to use ETFs inside of a fund wrapper or in an SMA
* Forge alliances: takes some time and resources to find the right partner and manage the relationship
* Acquire an ETF provider: takes more time, money and resources to find the right target, acquire and integrate
* Launch a new family of ETFs: takes the largest amount of resources to build your own team, eco-system to create, launch, manage, sell your own range of ETFs
Although 2014 started with ETFs/ETPs suffering net outflows of $7.5 billion in January the following 5 months have seen the net inflows surge to $126.6 billion a new record level at the end of June, which outpaces the previous high of $106.4 Bn at this point set in 2012.
Assets invested in iShares' 724 ETFs/ETPs surpassed $1 trillion, a new record at the end of June. In the past two years assets invested in iShares ETFs/ETPs have increased by $351 billion, while iShares' market share has declined by nearly 1%, falling from 38.7% to 37.9%. Year to date iShares gathered the largest in net inflows, $38.0 billion, followed by Vanguard with $34.7 billion, First Trust with $6.51 billion, Nomura AM with $4.66 billion and Guggenheim with $4.39 billion in net inflows.
The top three providers of ETFs/ETPs, iShares from BlackRock, SPDRs from State Street Global Advisors and Vanguard, account for 69% of the assets. They are all headquartered in the U.S. and have dominated the global landscape for many years with global footprints based a combination of registrations and cross-listings of their U.S. products as well as having locally domiciled products in various jurisdictions in the Americas, Europe and Asia.
The ETF/ETP industry is growing around the world and in most countries and regions reached new record highs in assets at the end of Q2 2014, including: in the United States $1.86 trillion; in Europe $470 billion; in Asia Pacific ex Japan $ 96.7 billion; in Japan $90.1 billion; in Canada $65.7 billion and in the Middle East and Africa $43.5 billion.
At the end of Q2 ETFs/ETPs had gathered a record level of $126.6 billion in net inflows. Equity ETFs/ETPs gathered $84.2 billion, followed by fixed income with $36.5 billion, while commodity ETFs/ETPs had net outflows of $3.0 billion.
There has been a net increase in the number of products growing from 4,684 to 5,359, the number of providers growing from 201 to 219 and the number of exchanges with listings growing from 54 to 59 exchanges.
Over the past few years there has been a significant increase in the discussion and forecasts for the potential for Active ETFs/ETPs. So far the assets invested in active ETFs/ETPs have remained below 1% of total assets. At the end of June there were 143 products with $24.3 billion or 0.9% of overall assets.
Smart beta ETFs and the potential for less transparent ETFs that are being discussed at the SEC (they will not offer daily transparency as active ETFs are required to provide in the U.S. but will be as transparent as mutual funds are) is creating interest in ETFs from a new set of asset managers.
Deborah Fuhr is managing partner at ETFGI.