January 16, 2019

ETF Assets Grow to Record High Despite Market Drop

Total assets in exchange-traded funds (ETFs) and similar products broke a new record in 2018 in spite of falling equity markets, as investors turned to a growing range of offerings.

The value of money invested in the funds grew to $4.79 trillion at the end of December from $4.76 trillion in 2017, according to data from BlackRock.The products lured a net $514.8 billion during the year, the second-highest annual inflow on record, failing to top the $659.3 billion attracted a year earlier. 

ETFs continue to gather assets as issuers come up with listings covering new geographies and strategies, and more investors adopt the funds due to their versatility and low fees. Sovereign bonds, emerging-markets equities and multi-factor equity were among categories that drew record amounts of money in 2018, BlackRock said, while European equities and high-yield bonds suffered net outflows. 

The STOXX® Global 1800 Index dropped 9.1% during 2018,its steepest retreat since the global financial crisis in 2008. During December, the benchmark suffered its worst month since May 2012 after falling 7.6%.  

Number of funds continues to grow

Within fixed income, short-maturity funds picked up a record $70 billion during 2018 amid rising interest rates. Emerging-markets equity funds gathered an all-time high of $66.4 billion, driven by record purchases of China and South Korea equity funds. Japanese equity ETFs took in $67.1 billion, the most ever, up from $55 billion in 2017. All figures are net of outflows. 

In a separate report,research firm ETFGI said the total number of ETFs and products grew 7.1% in 2018 to 7,657. The number of traded funds has grown every year since at least 2004, suggesting launches outpace closures. ETFGI put the overall assets invested in all traded funds at $4.79 trillion as of the end of 2018, compared with $4.84 trillion in 2017.  

December flows

Even as equity markets floundered in December, ETFs gathered net inflows of $76.2 billion during the month, the second-highest monthly inflow on record, according to ETFGI. Both equity and fixed-income funds registered net inflows. 

December marked the 59th consecutive month of net inflows for global ETFs and exchange-traded products, ETFGI said.

More institutional investors are using ETFs for tactical and strategic investments, attracted by their tradability, transparency and liquidity. Other drivers behind the increasing adoption include a boom in alternative-weight indexing such as factor approaches, and the growth of multi-asset and environmental, social and governance (ESG) strategies.

Featured indices

STOXX® Global 1800 Index

‘BlackRock Global ETP Landscape,’ December 2018. 
Total returns in dollars after taxes.
ETFGI Press Release, Jan. 10, 2018.