Dan Barnes Welcome to ETF TV, I’m Dan Barnes. Joining me today is Deborah Fuhr, CEO of ETFGI, a consultancy that specializes in the ETF space. And we’re going to be talking about the characteristics of the ETF universe, fund flows and fees. Deborah, welcome to ETF TV.
Deborah Fuhr Thank you, it’s great to be here.
Dan Barnes Deborah, can you tell us to start with, how have the characteristics of the ETF universe changed over the last month?
Deborah Fuhr So if you look at the data based on the end of April, what we’ve seen is the number of products are now just over 8000 ETFs and ETPs listed globally. Many of them are listed on multiple exchanges. So now we have just over 16.000 listings of ETFs, and they’re on 71 different exchanges in 58 countries. And there’s 450 issuers that have products out in the marketplace and the assets are back up to 5.8 trillion dollars.
Dan Barnes Wow, that’s amazing. And how have fees been changing?
Deborah Fuhr So there’s been a lot of focus on fees or talks about fee wars. And what we have seen is most of the ETF issuers that are big and have families of ETFs, have launched what they would call their core series or their cost efficient series. And so there has been a real focus on fees, and in some ways that makes sense, because when you have well-known, large asset managers that everyone feels they can trust to run products, to be able to differentiate between the products when people don’t really often know what to look for – and they should do their homework to figure out how to compare products – fees become a thing that many people focus on. And if we look at the trend, fees have come down, so today, the asset weighted fees across just ETFs is 21 basis points, compared to active funds that typically charge 1.6%.
And if you bucket ETFs into different pricing bands, there’s about 2.6 trillion dollars sitting in products that have fees between zero and 10 basis points. And there’s another about 1.6 trillion sitting in products that have fees between 10-20 basis points. So if you think of that 5.8 trillion, people are really migrating to those products. And what often happens is, those products become very popular. Their assets tend to grow. And so we see a significant concentration that only 740 out of those 8000 products have individually gathered over a billion dollars in assets. And if you were to add up the assets in those products, that accounts for 86% of that 5.8 trillion. So there’s a lot of really big products. And there’s a tail of very small products out there which often people can’t use because many professional investors are only able to invest where their investment is less than 10 or 20% of the assets in the fund they invest in. And it’s hard to get bigger when you’re small.
Dan Barnes That’s right. And have you seen differences in fund flows over the last month, and do you think that’s reflective, perhaps of fees?
Deborah Fuhr Well, we do see that people migrate towards lower cost products, but what we have seen is a shift that a month ago, so in March, the majority flows are going into equity focused products. In April, we had 57 billion of net inflows, so double what we had the month before. But this month, the majority of flows were going into fixed income, then to commodities, and there were actually some outflows of two billion out of equity focused products. So there is a significant shift in what people are investing in. I think part of it is going to be the challenge of the relationship between other countries and China, oil prices, the impact of the COVID-19 crisis, unemployment numbers, there’s a lot of economic and political factors at play out here. And people are really uncertain how to deal with it. So gold investments are really a flight to safety for many investors who are really concerned.
Dan Barnes I’d like to thank Deborah for her expertize in the ETF universe, and you of course for watching. To catch up on our other shows, go to ETFTV.NET and TRADERTV.NET.