Global ETF assets surpass USD6tn, says EPFR


Global ETF assets have surpassed USD6 trillion in according to research released by EPFR, a subsidiary of Informa and a specialist in providing fund flows and allocation data to financial institutions.

In 2019, Global ETF assets have added USD840 billion from 1 January to 31 October highlighting accelerated growth that has realised a new trillion-dollar plateau in each of the last four years. Since the Global Financial Crisis (GFC), ETF assets have grown six-fold, hitting trillion-dollar milestones:

• USD1 trillion in December 2009
• USD2 trillion in July 2013
• USD3 trillion in March 2016
• USD4 trillion in May 2017
• USD5 trillion in January 2018
• USD6 trillion in November 2019

The allocation breakdown of major asset classes for ETFs has not changed much since the global financial crisis. The growth in Equity ETFs has been considerable when compared to Equity Mutual Funds.

ETFs provide structural benefits that can be attractive for investors. As a rising tide lifts all boats, accommodative monetary policies from major central banks have boosted prices for nearly every asset class. In the US, where over USD4 trillion of global ETF assets are domiciled, the taxation of ETFs is more favourable and exerts less of a drag on performance than it does for regular funds.
Global Growth

While USD4.2 trillion of the USD6 trillion in global ETF assets are domiciled in the US, other parts of the globe have also realised an increase in fund flows since the GFC. 

• Nearly half of the USD2.4 trillion that has flowed into the Equity ETFs tracked by EPFR since 2002 have gone to funds with U.S. mandates

• Two-thirds of the total AUM in EPFR-tracked ETFs are managed by U.S. domiciled funds

• One US fund provider accounts for over one-third of the total AUM of all ETFs tracked by EPFR Global

• Some 36 per cent of the ETFs tracked by EPFR are domiciled in the US, down from 71 per cent in fourth quarter 2016

As different strategy types can come in and out of favor due to market trends and investor appetite, there has been a dramatic surge in relative flows into ETFs with socially responsible or environmental, social and governance mandates. EPFR research indicates this emerging trend reflect preferences of a growing cohort of millennial investors. Older investors recognize SRI/ESG as a means of getting another layer of due diligence without sacrificing performance. Since first quarter 2016 the collective performance gain for all Equity ETFs is 39 per cent vs. 35 per cent for ETFs with SRI/ESG mandates.

"The global growth of ETFs is undoubtedly an ongoing validation of how financial institutions and investors are electing to allocate," says Cameron Brandt, director of research at EPFR. "With our comprehensive data and fund flows research, we seek to provide essential analysis to serve as an industry differentiator. This USD6 trillion milestone provides an important inflection point of how much growth has occurred over the last decade since the Global Financial Crisis as well as to look ahead at future potential growth areas." 

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