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2017’s record ETF inflows

As the industry approaches $5 trillion.

According to figures from leading independent research and consultancy firm ETFGI, global exchange-traded funds (ETFs) and exchange-traded notes (ETNs) recorded inflows of $600 billion to the end of November. This is already 53.6% more than net inflows for the whole of 2016.

In a report, ETFGI managing partner Deborah Fuhr noted that assets invested in exchange-traded products had grown by 33.6% for the year to date to November 30 2017, to $4.74 trillion. This represents the greatest annual increase in assets under management since 2009, when markets recovered from the global financial crisis.

This year the growth has been almost equally due to inflows and price movements. In 2009, the growth was primarily driven by the upswing in equity markets.

There are a number of interesting aspects to the inflows in 2017. The first is that more than a third of net inflows went to just 20 out of the more than 7 000 products listed on world markets. Together, these 20 funds gathered $215.6 billion over this 11-month period.

The top five are shown in the table below:

Top 5 global ETFs by net new assets

Fund

Net new assets to Nov 30 2017

iShares Core S&P 500 ETF

$29.9 billion

iShares Core MSCI EAFE ETF

$20.0 billion

Vanguard FTSE Developed Markets ETF

$16.2 billion

iShares Core MSCI Emerging Markets ETF

$15.5 billion

TOPIX Exchange Traded Fund

$15.3 billion

Source: ETFGI

ETFGI’s figures also show that November was the 46th consecutive month of net inflows into ETFs and ETNs. In other words, net inflows have been positive every month since February 2014.

A third point to note is that smart beta products saw net inflows of $69 billion over the first 11 months of 2017. This is 11.5% of the total.

What is notable, however, is that the growth in assets of these smart beta products was below that of the overall market. Smart beta assets grew by 30.1%, compared with the overall growth of 33.6%.

Some of this could be a reflection of how the current bull market continues to be led by large-cap stocks. The biggest companies continue to get bigger, and this is supporting the growth in vanilla market cap indices.

Finally, ETFGI’s analysis shows that active exchange-traded products are starting to gather significant momentum. These are a more recent innovation in an industry that was for a long time synonymous with passive investing.

Active ETFs are portfolios run by active fund managers, but within an ETF wrapper. Their appeal is that in some jurisdictions they offer lower costs and taxes than mutual funds or unit trusts.

To the end of November, these products gathered net inflows of $23.7 billion. This is 141.2% more than the net inflows they received for the whole of last year.

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Many thanks for all your excellent research and articles over the year! Have a relaxed break and I hope we all have a much more profitable 2018!

Best wishes to everyone at Moneyweb! 🙂

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