2021 Was a Record Year for ETFs | ETF Trends

Global exchange traded funds enjoyed record inflows in 2021 as investors threw money at the low-cost, transparent, and easy-to-use investment vehicle.

According to Refinitiv Lipper data, global ETFs experienced a record $1.22 trillion in net inflows last year, or about 71% higher than in 2020, Reuters reports.

Meanwhile, global ETF total assets under management surged to a record $9.94 trillion, slowly bridging the gap in assets under management of mutual funds at about $43.8 trillion.

U.S.-listed ETFs continued to be a main attraction, accounting for $901 billion of the total global ETF inflows, followed by European- and Asian-listed ETFs drawing in about $190 billion and $88 billion, respectively.

Alan Kelly, global head of ETF services at financial services provider Apex Group, attributed the rising inflows to ETFs to the investment vehicle’s lower expenses, higher returns, and greater transparency compared to traditional mutual funds.

Furthermore, low-cost index-based ETFs that try to reflect the performance of widely observed equity benchmarks also stood out against actively managed mutual funds that continued to underperform their benchmarks. Global equity ETFs generated returns of 14.8%, compared to equity mutual funds’ gain of 11.6% last year. Additionally, commodity and bond ETFs also outperformed their mutual fund counterparts last year.

Kelly also attributed the growing popularity of ETFs to recent popular themes like cryptocurrencies and environmental, social, and governance (ESG) strategies that attracted investor flows.

“Active asset managers are increasingly using ETFs to gain long-term exposure to megatrends in their strategic allocations: This is no longer a tactical allocation but also core to their portfolios,” Denis Panel, head of multi-asset, quantitative and solutions at BNP Paribas Asset Management, told Reuters.

“ESG and thematic approaches within index management allow clients to make active investment choices, and give the opportunity for asset managers to express their convictions,” Panel added.

For instance, global ESG ETFs attracted $119.4 billion in inflows last year after bringing in $79.3 billion in 2020, according to Refinitiv data.

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