Assets invested worldwide in exchange-traded funds (ETFs) and exchange-traded products (ETPs) soared to a record high last year as general uncertainty in global markets and a dearth of active managers prompted investors to seek new types of investments, according to ETF research and analysis firm ETFGI.
Global assets invested in ETFs and ETPs jumped 27.6 percent to $1.95 tn at the end of 2012 from $1.53 tn at the end of 2011, according to data gathered by ETFGI. The net inflow to ETFs and ETPs, meanwhile, rose to $265 bn in 2012, an increase of about 56 percent from $170 bn in 2011. The inflow fell just short of the record, set in 2008, of $272 bn.
‘The uncertain and challenging market conditions investors have faced during 2012 and over the past few years, combined with the difficulty in finding active managers that consistently deliver alpha, have caused more institutional investors, financial advisers and retail investors to embrace the use of ETFs and ETPs for strategic and tactical asset allocations,’ says Deborah Fuhr, managing partner at ETFGI, in a statement.
‘ETFs provide greater transparency in relation to costs, portfolio holdings, price, liquidity, product structure, risk and return compared with many other investment products and mutual funds.’
The ETFGI data shows the world’s three biggest providers of ETFs and ETPs grew their market share further in 2012, as they accounted for 67 percent of all new assets invested in the year, or almost $180 bn. The three providers are iShares, which took in $87 bn in net new inflows last year, followed by Vanguard, with $54 bn, and SPDR ETFs, with $38 bn.
Net new assets in equity-focused ETFs and ETPs soared 85 percent, or almost $77 bn, to $167 bn last year, led by products offering exposure to North America, which saw an increase of $78 bn, and products exposing investors to emerging markets, which saw a gain of $54 bn, according to EFTGI data.
Net inflows into commodity ETFs and ETPs jumped more than 52 percent last year to $23 bn, led by precious metals, which saw $20 bn in new assets. Agriculture funds and products saw a net outflow of $1.5 bn. Fixed-income ETFs and ETPs saw a 39 percent increase in net inflows, which rose to $63 bn, led by corporate bond funds and products, with $24.7 bn in net new assets.
ETPs differ from ETFS ‒ which are bought and sold in the same way as shares on a stock exchange ‒ in that ETPs do not have an open-end fund structure, although they trade and settle in a similar way. ETPs vary greatly from ETFs in risk profile and taxation as they may use unsecured debt, commodity pools, grantor trusts, partnerships and other structures.
