Rising markets coupled with exodus from active mutual funds drive exchange-traded fund assets to US$9.7 trillion
After reaching a new high in inflows last year, the Canadian ETF space is well on its way to setting a new annual record. But on the global stage, ETFs have already smashed past the whole-year high they reached in 2020.
Citing figures from ETFGI, the Financial Times reported that at the end of August, worldwide net inflows into ETFs had reached US$834.2 billion, exceeding last year’s total of $762 billion.
Buoyed by rising markets and pushed by investments, global assets held in ETFs swelled to US$9.7 trillion, more than double the US$4.8 trillion that ETFs held collectively by the end of 2018.
Within the U.S., that growth has been fuelled by an exodus from traditional active mutual funds. Actively managed funds in the U.S. have undergone a steady decline, suffering net outflows in 12 of the past 13 years. According to the Investment Company Institute, those redemptions have added up to US$2.8 trillion since 2008.
“The shift by investors from actively managed funds into ETFs which began in the US has been spreading into every corner of financial markets since the end of the 2007/08 global financial crisis,” said ETFGI founder Deborah Fuhr. “Active managers know that competition from ETFs is intensifying everywhere and they have to respond.”
According to Morningstar, 199 ETFs debuted in the U.S. during the first half of this year, compared to just 109 mutual funds introduced over the same period. After years of standing pat, large active fund managers – including two American asset-management giants – are finally giving in to investors’ preference for the lower-cost ETF format.
In an announcement last month, Capital Group said that it intended to launch six active ETFs by the end of March; at the time, Capital CEO Tim Armour saw “no reason” why the company, which has US$2.6 trillion in AUM, could not develop a US$500-billion ETF business. Federated Hermes, a manager representing US$646 billion in assets, also aims to launch two active fixed-income ETFs.
Based on figures from ETFGI, inflows into active ETFs from around the world this year reached US$95.2 billion by the end of August, besting the full-year total of US$91.1 billion.