Another Look at ETF Industry Growth

The indomitable growth of the exchange traded products industry continued in 2013 with inflows reaching $247.3 billion on a global basis. That marked the second consecutive year ETF asset growth 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. [Record ETF Inflows in 2013]

“In 2013 the US ETF market grew in total assets, doing so through nearly $200 billion in net inflows, and also market appreciation, which amounted to growth of more than 20% compared to 2012 AUM levels. When the dust settled on 2013, total assets in US-listed ETFs stood at $1.7 trillion, nearly $300 billion above 2012 levels,” according to Dorsey Wright & Associates.

There are now over 1,500 ETFs and exchange traded notes (ETNs) listed in the U.S. and while the pace of new product launches is seen slowing, closures did as well last year. Sixty-five ETFs and ETNs were shuttered last year, down 35% from 2012.

“Some new funds hit the ground running each year, and just as many fail to resonate with investors, which is a natural discovery process for a maturing industry,” according to Dorsey Wright.

Some issuers avoided the asset-gathering struggles often associated with new ETFs by launching new funds with strong amounts of seed capital. For example, the db X-trackers Harvest CSI 300 China A-Shares Fund (NYSEArca: ASHR) and the Vident International Equity Fund (NasdaqGS: VIDI) topped in nine figures in assets under management in a matter of days or less. [Some New ETFs Are Off to Fast Starts]

Still, just 14% of U.S. ETFs have $1 billion or more in AUM while 51% have less than $100 million, according to Dorsey Wright data.

BlackRock’s (NYSE: BLK) iShares, State Street’s (NYSE: STT) State Street Global Advisors and Vanguard combine for 82% of all U.S. ETF assets. iShares has made significant inroads with retail investors. Retail investors accounted for $16.6 billion of the firm’s $40.5 billion in inflows last quarter, indicating initiatives such as the iShares Core suite of ETFs are bearing fruit for BlackRock. [ETFs Driving Profits at BlackRock]