Assets invested in ETFs and ETPs break $7 trillion milestone

Dan Barnes Welcome to ETF TV, I’m John Barnes, and joining me today is Deborah Fuhr from ETFGI. Deborah, welcome back to the show.

Deborah Fuhr Thank you. Nice to be here.

Dan Barnes So today we’re going to talk about the fund flows that we’ve seen over the last month in the last year, and to get an understanding of what this means for the ETF ecosystem. Could you just tell us, first of all, how flows have been over the last month or so?

Deborah Fuhr For the month of August, we saw 55 billion of net new assets coming into the ETF industry, and year to date it’s been 428. So to put that in perspective, last year at this point we had 272 billion of net new assets coming in. We’ve had 15 months of positive net inflows, which is really impressive when you think about what’s happened in the market, especially during this year, right. The month of August has seen slightly more money going into equities. So we’re seeing more of a risk on trade, although we’re still seeing money going into commodities. And clearly this has been a very good year for fixed income, so fixed income still saw significant inflows. We also saw that investors are investing into active ETFs. So these new semi- or non-transparent ETFs. And I think when we dive into the numbers in equities, people are investing in market cap. But there’s real interest in thematics, right, so post-pandemic, work-from-home, people are looking at disruptive technology, they’re looking at health care and themes that are going to do well over the longer term. You’re also seeing ESG playing a more prominent role, especially in Europe, because we do have the European regulators really pushing this agenda, but we are seeing an inference based on the pandemic, and working from home really did improve the quality of the sky and the air. And people are seeing a need for that, as well as the social issues that have come to the forefront, which we’re seeing being another theme that investors are investing in. In gold, there are some people who are concerned about printing this money in the stimulus, are we going to see inflation, so gold’s a good inflation hedge? Others see gold as a safe harbor, so we’ve seen 50 billion of net inflows to gold. And last year at this point, it would have been 15. So those are some of the flows that we’ve seen kind of on a year to date and also for the month.

Dan Barnes And have we seen any structural changes in the ETF ecosystem?

Deborah Fuhr One big thing we have seen is the assets have been growing, so part of it is market move as well as net new assets. Globally, the assets have reached a new record breaking through the seven trillion milestone globally. So that’s huge. We also saw that the US now is at 4.85 trillion. So that’s a big structural shift. I think Europe now at 1.13 trillion is also big. Japan is a record of 449 billion, and you know, clearly, Bank of Japan helps that one as they’re about 70% of the assets and then Canada is also at a record. So when we look at some of the other changes that are driving adoption and use, there clearly is a preference for ETFs that are bigger, because compliance get comfortable because they see a lot of money already there. They can go in with bigger sizes, in and out, and lower fees. So when we look globally right now, we have 8287 ETFs or ETPs, and 483 of them individually have assets greater than two billion dollars. When you add up the assets in those products, they account for 80% of that seven trillion. So there’s a few really big ETFs that gathers the lion’s share of assets. And the other trend is going towards low cost. So for a lot of people, they do look at lower cost products. And so if you look at products that have fees between zero and 10 basis points, they account for 2.7 trillion dollars and there’s 536 products in that bucket. The next bucket being 10-20 is another 1.5 trillion. And so if you add up those two buckets, we have 4.2 or more than half of all the assets in products with fees below 20 basis points annually.

Dan Barnes That’s been excellent. Thanks very much, Deborah.

Deborah Fuhr Thank you.

Dan Barnes I’d like to thank Deborah for her insights today, and of course, you for watching. To catch up on our other shows go to ETFTV.NET and TRADERTV.NET.

Published on September 30, 2020