The total assets in global exchange-traded products (ETPs) and ETFs have surpassed $5trn, a new record, according to data from research and consultancy firm ETFGI.
In January, global assets under management (AUM) of ETFs and ETPs grew by $313bn, a 6.5% increase and the strongest monthly growth since March 2016, reaching a record of $5.2trn and beating the previous highest point of $4.8trn reached in December 2017.
The new milestone was reached following record monthly inflows into exchange-traded vehicles, with investors pouring more than $100bn into them in the first month of 2018. This is yet another sign of the growing popularity of ETFs, which have now experienced 48 consecutive months of inflows globally.
The strong flows have been driven to a significant extent by any investors losing faith in active management, as well as various studies published over recent years showing that passive products can often deliver similar or even superior returns to active funds.
Deborah Fuhr, co-founder of ETFGI, told the Financial Times: “The ETF industry has passed the $5trn mark for assets far more quickly than almost anyone anticipated. But ETFs represent only a small fraction of invested assets worldwide.
We are still only in the early stages of ETF adoption in many regions and there is huge potential for further ETF growth in fixed income markets globally.
Progress toward the $10bn milestone may also prove faster than currently expected if market conditions remain favourable.”
Demand for stocks
Before the sell-off in stockmarkets in late January, equity products saw the bulk of the recent surge in inflows. Overall, equity ETFs took in $87.7bn of the total $105.7bn January ETP sales, equivalent to a 7.5% in equity assets. Fixed income products, on the other hand, only saw a 1.7% rise in AUM.
The four-year surge in ETF inflows has coincided with a long bull run for the S&P 500 index, which reached a new record on 26 January before experiencing a setback at the end of the month as stock markets across the globe suffered a minor correction. The US equity market has also been the most popular region with investors since the beginning of 2018, and even despite the end-of-January sell-off the cumulated inflows into the region’s equities this year to 8 February have reached €29.3bn, according to TrackInsight data.
The demand was strongest for large caps and cyclical equities, BlackRock reports, fuelled by the US tax overhaul and a higher level of federal spending than originally expected.
Meanwhile, Japanese equities also experienced particularly strong flows, drawing in $12.1bn in January, according to BlackRock’s monthly ETP Landscape Report, a new monthly best for the region. The demand was driven by strong Japanese company earnings, improving global growth and continued support from the Bank of Japan.
Broad emerging market equities and EM debt also both set new monthly sales records, collecting $10.6bn and $4bn, respectively, fuelled by a weaker US dollar and rising commodity prices. In particular, EMEA-listed EM equity ETPs experienced the highest ever monthly inflows, gathering $2bn.
EMEA-listed European equity ETPs also started the year on a strong note, taking in $3.8bn in a reversal of the outflows the asset class suffered in December 2017 and marking the strongest monthly sales since last July.
Overall, ETFGI reports that ETFs and ETPs listed in Europe gathered a net $16bn in January, while total assets invested in these vehicles increased by $54bn to reach a new high of $856bn. January 2018 marked the 40th consecutive month of inflows into European-listed ETFs and ETPs, and the greatest absolute monthly growth on record.
However, European-listed vehicles continue to lag behind their US counterparts, meaning there is a lot of potential for strong growth in the future.