BlackRock achieved an all-time high in ETF inflows last year, but it has already managed to break that record in the first six months of this year alone.
Based on preliminary data from London-based consultancy ETFGI, the asset manager’s ETF business has attracted US$140bn in investments so far this year – slightly ahead of its whole-year 2016 showing of US$US138bn, according to the Financial Times
BlackRock’s closest rival, Vanguard, got ETF inflows of around US$82bn by the end of June, putting it on course to beat its own 2016 annual record of US$97bn.
State Street Global Advisors, the third-largest provider in the industry, and US asset manager Charles Schwab have also experienced significant accelerations in new business this year. The ETF industry has benefited from investor dissatisfaction with high fees and poor performance among traditional investment managers that try to beat the market.
So far this year, global investor inflows into ETFs have reached about US$335bn, just US$55bn away from 2016’s whole-year record for inflows. Numbers from Australia, which reports ETF data behind other countries, have not yet been incorporated into 2017’s global tally.
“ETF adoption is growing markedly in Europe and Asia as well as the US,” said ETFGI co-founder Deborah Fuhr. “Innovations such as robo-advisers that use ETFs as portfolio building blocks will help to drive growth further.”
The ETF market has attracted US$1.7trn in new cash over less than five years, heightening concerns of a passive-driven price bubble in the US stock market. In the middle of June, the S&P 500 index reached an all-time high.
“The increase in investor demand for global equities is the fuel for rising markets and this is occurring across a wide variety of investment vehicles, not just ETFs,” a BlackRock spokesperson told the Times
If that’s true, a market downturn could cut off the surge of money into ETFs. Equity ETFs account for around 80% of the assets in the market.
In the latest monthly survey of fund managers by Bank of America (BofA) Merrill Lynch, more than four fifths of respondents said the US stock market, which has risen 13% since US President Donald Trump’s election victory in November, was the most overvalued equity market.
Conditions for equity markets are likely to get more challenging over the next six months as interest rates rise and central banks shift policies, according to BofA Merrill Lynch Chief Investment Strategist Michael Hartnett. He said that a policy shift by the US Federal Reserve and the European Central Bank has added to the risk of a “big fall” in developed stock markets this autumn.
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