Exchange traded funds have spent the better part of the past 20 years being pesky rivals to mutual funds, but with the exponential growth of the ETF industry, that rivalry is intensifying and it is ETFs, not mutual funds, wracking up the impressive milestones.
This is the latest milestone for ETFs: For the year through March investors’ ETF holdings grew more than their mutual fund holdings, Daisy Maxey reports for the Wall Street Journal, citing Broadridge Financial Solutions.
“Individual-investor holdings of ETFs grew by $267 billion in the year through March, a 24.4% increase, according to Broadridge. Over the same period, individuals’ holdings of long-term mutual funds grew by $255 billion, or 5.6%, the company said,” according to the Journal.
By sheer number, mutual funds still dwarf ETFs. The number of U.S.-listed exchange traded products is approaching 1,700, but there are close to 8,000 U.S. mutual funds.
That has not derailed ETFs from growing at breakneck speed. Strong March inflows brought first-quarter ETF inflows to $97.2 billion, or nearly triple the total from the from the first quarter of 2014, according to BlackRock data.
“Global ETFs gathered $36.1 billion in March to lift Q1 flows to $97.2 billion, nearly triple the total from Q1 2014,” said BlackRock. [ETFs Haul in $36.1B in March]
Growth, as measured in dollar terms, of ETF holdings comes at a time when more institutional investors are mulling increased use of ETFs and as ETFs are poised to overtake hedged funds in terms of combined assets under management.
A recent survey conducted by Invesco’s (NYSE: IVZ) PowerShares unit, the fourth-largest U.S. ETF issuer, and Market Strategies International, shows that use of smart beta ETFs by professional investors continues climbing.
Sixty-four percent of institutional usage of smart beta ETFs is currently concentrated to dividend funds, a number that is expected to rise to 67% over the next three years, according to PowerShares. Over the same period, institutional usage of fundamentally weighted ETFs is forecast to rise to 68% from 61% while professional adoption of low volatility is expected to surge to 71% from 57% today. [Business is Booming for Smart Beta ETFs]
“According to our analysis published on April 24th, assets in the global ETF/ETP industry reached a new record of US$2.926 trillion at the end of Q1 2015, while assets in the global hedge fund industry, according to a new report published by Hedge Fund Research (HFR), reached a record US$2.939 trillion. Assets in the ETF/ETP industry have been gaining on those invested in the hedge fund industry with the difference narrowing from US$230 billion at the end of 2013 to just US$13 billion at the end of Q1 2015,” said ETFGI, a London-based ETF research firm, in a note published last month. [ETFs are Almost Bigger Than Hedge Funds]
ETF Trends editorial team contributed to this article.