With the end of 2013 in sight, the global exchange traded products industry is closing another strong chapter in its enviable growth story.
“Year-to-date flows of $209.9bn through November remain close to last year’s record level, a strong proof point for the secular growth of the industry,” said BlackRock (NYSE: BLK), the world’s largest asset manager and parent company of iShares.
The U.S., the world’s largest ETF market, remains the primary growth driver for the industry.
“One wouldn’t expect the largest regional asset base to grow at such a high rate compared to smaller regions, but the US industry saw net inflows of $169bn as well as robust Equity market returns in 2013. Although the US now accounts for 71% of all global ETP assets, it had the highest growth rate. Year to date, assets have grown 24%, surpassing its three year annualized growth rate of 19%. $16bn or approximately 10% of US ETP flows have come from non-US clients,” said BlackRock in its recent ETP Landscape. [October a Banner Month for ETF Inflows]
Intelligent indexing, fundamental indexing or smart beta ETFs also saw impressive growth this year. Although many of these ETFs have been around for more than seven years in some cases, the smart beta conversation intensified this year.
“Strategic Beta Equity funds gathered a record total of $61.3bn – nearly a third of this year’s global industry flows – with asset growth of over 40%. Dividend weighted- funds once again led Strategic Beta with $27.6bn of flows this year, more than double the $13.1bn collected in 2012. Many income-seeking investors have turned to dividend stocks as bond alternatives in a persistent low-interest rate environment,” noted BlackRock.
The growth of smart beta ETFs may just be getting started as institutional investors plan to boost their usage of these ETFs. A new study by Cogent Research indicates “that more than half (53%) of institutional decision makers will increase their use of smart beta ETFs over the next three years – higher than any other ETF category, including market-cap weighted ETFs (48%),” according to a statement from PowerShares, the fourth-largest U.S. ETF sponsor. [Institutions to Increase Use of Smart Beta ETFs]