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US ETFs and ETPs reach all-time high of USD1.42trn at the end of January

Fri, 08/02/2013 - 14:05

Assets invested in exchange-traded funds and exchange-traded products listed in the US reached a new record high of USD1.42trn at the end of January 2013.

ETF and ETP assets have increased by 5.5 per cent from USD1.35trn to USD1.42trn during January, according to figures from ETFGI’s monthly US 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 S&P 500 index was up 5.0 per cent in January, which ranked as the 12th best January since 1950 and the 19th 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.

Overall there were USD29.9bn of net new assets allocated to ETFs and ETPs in January which is slightly higher than the USD28.1bn in December 2012 and 3.8 per cent above the USD28.8bn of net inflows in January 2012.

Investors allocated USD29bn of net new assets to equity ETFs and ETPs in January. This is a continuation of the trend started in December when USD28.6bn of net new assets allocated to equity ETFs and ETPs in December 2012. Equity focused ETFs and ETPs providing exposure to North American equities have been the most popular receiving USD13.8bn, followed by emerging market equities with USD7.4bn and global (ex-US) equity exposure with USD3.0bn. During January fixed income ETFs and ETPs gathered just USD76m and commodity ETFs and ETPs had net outflows of USD615m.

“The flows into the equities show investors risk appetite is increasing as investors are feeling more confident 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. There are signs of a rotation out of fixed income into equities,” says Deborah Fuhr, managing partner at ETFGI.

Fixed income ETFs and ETPs gathered only USD76m, with USD756m going into high yield exposure and USD371m into inflation linked ETFs and ETPs while government, emerging market, mortgage-backed and broad/aggregate bond exposures experienced net outflows of USD1.2bn, USD263m, USD201m and USD153m respectively.

Commodity ETFs and ETPs had net outflows of USD615m. Products offering exposure to precious metals had new outflows of USD1.3bn and energy ETFs and ETPs had net outflows of USD379m while broad commodity ETFs and ETPs gathered net inflows of USD900m.

“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. 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,” says Fuhr.

At the end of January the US ETF and ETP industry had 1,446 ETFs and ETPs, assets of USUSD1.42trn, from 54 providers on three exchanges. Vanguard gathered the largest net new ETF and ETP inflows in January with USD11.0bn, followed by iShares with USD10.9bn, then Powershares with USD2.5bn and WisdomTree with USD2.0bn, while SPDR ETFs experienced the largest net outflows with USD1.7bn.

iShares is the largest ETF/ETP provider in terms of assets with USD586.8bn, reflecting 41.2 per cent market share; SPDR ETFs is second with USD328.5bn and 23.1 per cent market share, followed by Vanguard with USD263.8bn and 18.5 per cent market share. The top three ETF/ETP providers, out of 54, account for USD1.18trn or 82.9 per cent of ETF/ETP assets in the US.

Indices and their methodology are a key factor in selecting and using ETFs and ETPs, and while there are over 100 firms providing indices, just over half (727) of the 1,446 products listed in the US track an index licensed by one of the three largest index providers; S&P Dow Jones, MSCI or Barclays Capital. Assets in these 727 products total USD954.8bn, or 67.1 per cent of all ETF and ETP assets in the US.

S&P Dow Jones is the leading index provider for ETFs and ETPs with 437 products tracking their indices. These products account for USD441.9bn or 31.1 per cent of all assets and gathered USD5bn in net new assets in January. MSCI ranks second with 170 products, USD351.9bn or 24.7 per cent of all assets, with USD15.0bn of net new assets going into ETFs and ETPs tracking their benchmarks. Barclays Capital ranks third with 120 products, USD161bn or 11.3 per cent of assets, reflecting the growth in the use of ETFs and ETPs for fixed income exposure.


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