Increased market volatility, sparked by emerging market turmoil and disappointing U.S. economic news, dominated headlines in recent weeks. But a record-breaking event within the investment industry stayed just under the radar. The total number of global ETFs exceeded 5,000 for the first time this year, a significant milestone that signals greater value available to investors.
ETF Growth Accelerates
Since their introduction in the early 1990s, the pace of new ETF launches was gradual. It took more than 15 years for global ETF listings to hit the 2,000 product mark. But as more investors sought ETF solutions, growth quickly accelerated, more than doubling in the past 6 years to surpass 5,000 funds. Today, the United States accounts for the largest share of ETF assets, making up 71%, or $1.6 trillion, of the overall market across 1,556 funds.
As illustrated below, new ETFs continue to be introduced to the market at a strong rate across the globe and 158 new ETFs were introduced in the U.S. alone last year. New product development has been strongest in Europe over the past five years, and today Europe has the most products available, with 2,141.
Finding Value in today’s ETF Landscape
The continued momentum, as well as increased competition and innovation within the ETF industry, provides substantial value for investors. On the Blog I’ve discussed how, in volatile market environments when sentiment begins to shift, ETF trading volumes tend to increase in absolute dollar terms while staying consistent with total U.S. equity market trading volumes. We saw this trend play out last summer, when market volatility returned in June after then-Chairman Ben Bernanke hinted at tapering the Fed’s easy money program. During that time, investors sought ways to minimize volatility while maintaining a well-diversified portfolio, and looked to solutions that provided liquidity in stressed market conditions.2