The secular growth story for the exchange traded products continued last year as 2013 inflows checked in at a record $247.3 billion. That marks the second consecutive year inflows topped $200 billion.
Flows to U.S. ETFs and ETNs dominated at a combined $190.5 billion, according to BlackRock (NYSE: BLK), the world’s largest asset manager.
“ETFs continue to attract a broad base of global investors, driven by regional regulatory developments, deepening ETF liquidity, and increasing awareness among both retail and institutional clients of the benefits of ETFs. These efficient tools are being used by for all types of investors — from capital market participants looking for liquidity, to pension clients seeking specialized exposures, to a growing segment of the market using ETFs as buy and hold investment vehicles,” said BlackRock Global Head of ETP Research Dodd Kittsley in a statement.
Digging deeper into the numbers, winning and losing asset classes become more apparent. For example, gold ETFs were stung by massive outflows in 2013. [2014 May Not be Much Better for Gold ETFs]
“Gold ETP outflows of ($40.1bn) in 2013 offset all inflows from the past three years combined as the price of Gold fell from its peak and investors turned to Equities for more attractive returns,” according to BlackRock.
On the other hand, smart-beta, or non-cap weighted ETFs, continued to gain stature…and assets. Smart beta ETFs “contributed a record $65.1bn of inflows in 2013 led by dividend-weighted funds, and nearly doubled the $34.2bn from last year,” said BlackRock. [Smart Beta ETFs Shine in 2013]
Despite their vulnerability to rising interest rates and claims that investors were looking for higher-beta fare, low volatility ETFs raked in $13.2 billion last year. U.S.-focused “low vol” ETFs lagged last year, but comparable funds offering exposure to emerging markets were significantly less bad than traditional ETFs focused on developing world equities. [Some Low Vol ETFs Worked in 2013]
Dividend ETFs pulled in $29 billion. Bond ETFs saw 2013 inflows of $27.5 billion due primarily to the $35.9 billion investors poured into short-duration funds.
“US ETP assets have grown at a 27% CAGR over the past 10 years. This compares to 7% for mutual funds. In 2013, US ETPs not only kept up with their historical pace by growing 26% but they also achieved the highest asset growth of all ETP regions for the year. Assets increased by $351.7bn, with flows of $190.5bn boosted by record market move for the industry of $161.2bn,” according to BlackRock.
Top 10 ETFs 2013 Inflows
Table Courtesy: BlackRock