Through November, the ETF industry has added $192 billion in new assets, surpassing full-year 2013 inflows of $188 billion. Last month, U.S.-listed ETFs added a monthly record $42 billion in new asset and the U.S. ETF industry is now flirting with $2 trillion in combined assets under management, or about 75% of the assets held by the global ETF industry.
BlackRock (NYSE: BLK), the world’s largest asset manager and parent company of iShares, the world’s largest ETF issuer, is benefiting in significant fashion from the industry’s exponential growth.
“Since BlackRock acquired its iShares line of ETFs from Barclays Global Investors in late 2009, the investment product has seen the fastest growth among all that the company has to offer. And the brisk growth pace is not expected to slow down any time soon. BlackRock’s ETF assets are roughly split in a 70:30 ratio between equity iShares and fixed-income iShares. We believe that equity iShares will be the single largest driver of value for BlackRock in the future, as we estimate a 10% annual growth in size of their assets over coming years,” according to Trefis.
As of Dec. 18, three of the top 10 asset-gathering ETFs this year are iShares funds – the iShares Core S&P 500 ETF (NYSEArca: IVV), iShares Core U.S. Aggregate Bond ETF (NYSEArca: AGG) and the iShares MSCI EAFE ETF (NYSEArca: EFA). Only Vanguard with five has more ETFs on the top 10 list for 2014 inflows. [ETFs Keep Hauling in Cash]
However, BlackRock remains the undisputed global ETF leader. The company has $760.6 billion in U.S. ETF assets, or 38.3% share of the world’s largest ETF market, according to Trefis. On a global basis, those numbers jump to $1.03 trillion for 38% market share. The $338.5 billion AUM gap between iShares and Vanguard for U.S. ETF assets is equivalent to about three and half times Boeing’s (NYSE: BA) market value.
Investors have responded, sending shares of BlackRock higher by 13.6% this year, a performance that puts the stock slightly ahead of the Financial Select Sector SPDR (NYSEArca: XLF).
With institutional investors expected to continue increasing use of ETFs, bright forecasts are in place for BlackRock and other publicly traded asset managers with significant ETF exposure.
In its 2014 U.S. Institutional ETF Usage Report published earlier this month, BlackRock notes the “results show that institutional use of ETFs is expected to rise across the board. This trend holds true for both existing institutional ETF investors and those who do not currently hold ETFs.” [Institutional ETF Use on the Rise]
BlackRock and rival Invesco (NYSE: IVZ) are also expected to be big beneficiaries of the smart beta boom.
“The expansion of smart beta will benefit asset managers with businesses centered around smart beta the most. Invesco’s Powershares franchise, which offers smart beta ETFs, will benefit, as will Blackrock. Guggenheim may also benefit given the majority of its ETFs are based on non-traditional indexing,” according to a research note by Moody’s Investor’s Service published earlier this year.
Chart Courtesy: Stock Charts
Tom Lydon’s clients own shares of EFA and IVV.