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]
On the new product front, roughly 150 new ETFs and ETNs have debuted this year in the U.S. and 485 around the world. Although the pace is moderating, some new ETFs are proving proficient at attracting assets. [These 10 New ETFs Have Rapidly Gained Assets]
“485 ETPs made their debut in 2013 and accumulated assets of $22bn through November. Of these new launches, 100 were Strategic Beta Equity funds with total assets of $5.5bn. New fund launches have been on the decline with 659 coming to market last year and more than 900 for each of the prior two years. In 2013, there were 211 funds and share classes delisted. This is on par with 2012, but higher than previous years,” said BlackRock.
Global ETP Number & Asset Growth by Year
Chart Courtesy: BlackRock.
ETF Trends editorial team contributed to this post.