Dollars

ETFs and ETPs reach all-time high of USD2.05trn at the end of January

Assets invested globally in exchange-traded funds and exchange-traded products broke through the USD2trn milestone at the end of January 2013 to reach a new all-time high of USD2.05trn.

ETF and ETP assets have increased by 5.2 per cent from USD1.95trn to USD2.05trn during January, according to figures from ETFGI’s monthly Global ETF and ETP industry insights.

Market performance contributed to the increase in the value of assets held in ETFs and ETPs as 18 of the top 20 markets globally showed gains in January. Two of the markets with strong gains were the US and the UK where history has shown that a strong January tends to be a good predictor for the rest of the year. A review of history in both markets shows that strong January performance is typically followed by positive returns in the subsequent 11 months.

The FTSE 100 index was up 6.5 per cent in January, which ranks as the best start to the year since 1989. According to FTSE, 14 of the 17 Januaries with positive performance since 1984 (when the index was launched) were followed by 11 months of positive returns. Similarly, the S&P 500 index was up 5.0 per cent in January, which ranked as the 12th best January since 1950 and the 19 January since 1950 when the index was up more than four per cent. Again, since 1950, January gains of at least four per cent in the S&P 500 have been followed on average by gains of 15.1 per cent in the subsequent 11 months of the year. Only once since 1950 did the S&P 500 rise by more than four per cent in January and then finish the year lower than it did at January’s end – and that was in 1987.

Investors allocated USD34.5bn of net new assets to equity ETFs and ETPs in January. This continues a trend that began in December 2012 when USD36.2bn of net new assets were allocated to equity ETFs and ETPs. Overall, USD37.3bn of net new assets were allocated to ETFs and ETPs in January 2013, an eight per cent increase on the USD34.5bn of net inflows in January 2012 and in line with the USD37.8bn in December 2012. During January 2013, fixed income ETFs and ETPs gathered just USD1.4bn while commodity ETFs and ETPs saw net outflows of USD411m.

“The flows into equity ETFs and ETPs show an increasing investor confidence as global economic concerns over corporate earnings, US debt ceiling, US housing market, US job outlook and the outlook for the Eurozone seem to be improving,” says Deborah Fuhr, managing partner at London-based ETFGI. “Additionally, there are signs of a rotation out of fixed income into equities.”

Equity focused ETFs and ETPs providing exposure to North America were the most popular this January, receiving USD14.6bn. Emerging market equities were in second place with USD10.7bn and global (ex-US) equity exposure came in third with USD3bn.

Fixed income ETFs and ETPs gathered only USD1.4bn, with USD1.2bn invested in high-yield exposure and USD720m in corporate bond ETFs and ETPs. Government bond, money market and mortgage- backed products experienced net outflows of USD544m, USD332m and USD302m respectively.
 
Commodity ETFs and ETPs had net outflows of USD411m over the course of January. ETFs and ETPs providing exposure to precious metals experienced net outflows of USD1.4bn and energy ETFs and ETPs had net outflows of USD453m. Meanwhile investors moved USD964m into ETFs and ETPs offering broad commodity exposure.

“A growing number of institutional investors, financial advisors and retail investors are embracing the use of ETFs and ETPs for strategic and tactical asset allocations,” says Fuhr. “ETFs provide greater transparency in relation to costs, portfolio holdings, price, liquidity, product structure, risk and return compared to many other investment products and mutual funds.”

At the end of January there were 4,766 ETFs and ETPs with 9,813 listings and assets of USD2.05trn. The products were from 209 providers and were listed on 56 exchanges. iShares gathered the largest net new ETF and ETP inflows in January with USD14.5bn followed by Vanguard with USD11.4bn while SPDR ETFs experienced net outflows of USD1.5bn. iShares is the largest ETF/ETP provider in terms of assets with USD798.5bn, reflecting 39.0 per cent global market share; SPDR ETFs is second with USD347.3bn and 16.9 per cent market share; and Vanguard is third with USD265.5bn and 13.0 per cent market share. These top three ETF/ETP providers account for USD1.41trn, or 68.9 per cent, of global ETF/ETP assets, while the remaining 206 providers each have less than four per cent market share.

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