While global markets experienced greater oscillations over 2018, investors continued to pile more money into exchange traded funds as their investment of choice.
U.S.-listed ETFs still attracted $314 billion in net inflows over 2018, marking the first time the ETF industry accumulated more than $300 billion in inflows for two consecutive years, Matthew Bartolini, Head of SPDR Americas Research at State Street Global Advisors, said in a research note.
However, the U.S. ETF industry still shrunk over 2018 after the price volatility sent 71% of all global stocks into a bear market and caused the S&P 500 to experience its worst December performance since 1931, ending a streak of nine consecutive years of positive annual total returns.
“For the ETF industry, 2018 could be considered the year that went nowhere, as assets fell by $26 billion. The market’s impact completely offset the $314 billion of inflows during the year,” Bartolini said.
ETF investors still favored stock strategies as they funneled close to $213 billion into equity ETFs, followed by close to $97 billion in fixed income-related ETFs.
We also saw an uptick in interest for alternative and mixed allocation strategies that could have provided a more diversified investment approach in a year marked by volatility in traditional stock and bonds. Specifically, mixed-allocation ETFs added $2.7 billion or a 28.2% increase year-over-year, and alternative ETFs attracted $1.2 billion or a 46.9% jump year-over-year.
Looking ahead, Bartolini argued that the benefits of the ETF structure should continue to help the investment vehicle attract more attention down the road.
“The shift to indexing, lower costs, efficient use cases for strategic and tactical asset allocation, and the increased transparency into holdings, and therefore drivers of return, should continue supporting overall industry growth. This trend is evidenced by equity strategies still taking in more $200 billion on the year, with $34 billion even as the market was falling out of bed in December,” the strategist said.
For more information on the ETF industry, visit our ETF performance reports category.