With a greater number of ETF solutions available in the marketplace, investors can create an even more tailored strategy to suit their needs, while maintaining an appropriate level of liquidity in uncertain market environments. Increased offerings also provide access to new markets and investment strategies, such as emerging markets (EM) and “strategic beta”, which were previously available only to ultra-high net worth investors and institutions. The breakdown of ETFs launched per year, per asset class, is illustrated below.
New fixed income ETF products continued to come to market last year as investors reevaluated their bond strategies in a rising interest rate environment. Since the start of 2013, newly launched fixed income ETPs have gathered $8.4bn, or 17% of all fixed income ETP flows (as of February 21st 2014). As expected, 48 newly launched short-maturity funds led this trend with $3.3 billion in inflows. While individual fixed income strategies may fall out of favor as interest rates fluctuate, ETFs may help to diversify the risk. New product offerings can make it easier for an investor to find an optimal solution in today’s environment.
Dodd Kittsley, CFA, is the Global Head of ETF Research for BlackRock and a regular contributor to The Blog. You can find more of his posts here.
1Data is as of January 30, 2014 for Europe and January 31, 2014 for the US, Canada, Latin America, Israel, and some Asia ETPs. Some Asia ETP data is as of December 31, 2013. Global ETP flows and assets are sourced using shares outstanding and net asset values from Bloomberg for the US, Canada, Europe, Latin America and some ETPs in Asia. Middle East ETP assets are sourced from the Bank of Israel. ETP flows and assets in China are sourced from Wind. Inflows for years prior to 2010 are sourced from Strategic Insights Simfund. Asset classifications are assigned by BlackRock based on product definitions from provider websites and product prospectuses.
2Source: Bloomberg as of June 2013. Market volatility was sourced from Bloomberg as measured by elevated levels in the VIX and MOVE indexes. The MOVE index was up 125% in May-June 2013 (110.98 on June 24th 2013 versus 49.24 at the end of April 2013.