Equity ETFs are on track to pull in $300 billion in 2017, after solid flows in November – but the flows have also fuelled continued regulator interest in the industry.
During a period where the ETF sector is breaking several records, November saw $30.6 billion of inflows, pushing total ETF inflows to $294 billion, according to data from State Street Global Advisors (SSGA).
If the record of $200 billion is hit by the end of December, it will mean the highest number of inflows ever gained in a year. It is also a year where US stock markets like the Dow Jones Industrial Average and the S&P 500 have reached record highs.
Equity participation to remain high?
“Investors may be uncomfortable in this type of snow globe world,” said Matthew Bartolini, head of SPDR Americas Research at SSGA, adding that the low level of volatility is remarkable given the amount of uncertainty and geopolitical turmoil.
While the VIX Index hit 28 points in mid-2015, it has sunk to current levels of around 11.5.
“But given the strong macro case underpinning the current market, investor participation will likely stay high, as it seems that no matter how hard the snow globe is shaken, the storm always clears and the underlying scene remains tranquil and untouched,” he said.
The US remains the dominant ETF market, attracting $146.9 billion so far this year, and global equities have received $12.3 billion of net new inflows, a 40 per cent rise – thanks to surging interest in sectors like technology, financials, real estate and large-caps.
Equity and fixed income see gains
Fixed income has also done well. Bonds gained $6.5 billion in November, with total inflows this year at just over $120 billion.
“Fixed income funds continue to post inflows which, though nominally less than equities, have grown the segment’s assets by nearly a third in 2017, twice the asset growth of equities in this period,” Bartolini said.
Despite positive inflows for the ETF world, the International Organization of Securities Commissions is planning to make new recommendations regarding the oversight of ETFs. This follows the announcement of a review of ETFs from the Central Bank of Ireland earlier this year as worries mount over ETF liquidity and their potential to exacerbate market volatility – claims which ETF experts have disputed.