Assets in global ETFs and ETPs reached a new record high of US$1.86 trillion at the end of Q3, surpassing the prior record of US$1.76 trillion set at the end of August 2012. Year-to-date through end of Q3 assets have increased by 21.7% from US$1.53 trillion to US$1.86 trillion in the 4,690 ETFs and ETPs, with 9,626 listings, from 204 providers on 56 exchanges.
Although the global ETF and ETP market continues to grow on many measures it remains very competitive; the top three providers consistently capture over 60% of assets, net new assets and trading volumes. Assets invested in ETFs and ETPs have grown at 26.5% CAGR over the past 10 years. The United States accounts for 70.1% of the US$1.86 trillion in global assets, Europe represents 18.8% and Asia Pacific (ex-Japan) 3.9%, leaving 7.2% for the rest of the world.
The top three providers collectively hold 68.7% of global assets. iShares ranks first with 38.3%, SPDR ETFs is second with 18.0% and Vanguard third with 12.4%. There is a 9.1% gap between third place and DB/x-trackers in fourth with 3.4% of global assets. The remaining 200 providers hold just slightly more than a quarter of global assets. The top 3 firms have held between 68-71% of global assets for many years. It will be very difficult for a new entrant or an existing firm to grow organically into the top 3.
The top three firms based on assets are also winning the net new asset (NNA) race accounting for 65.0% of all of NNAs, with iShares accounting for 26.7%, Vanguard 22.8% and SPDR ETFs 15.5%. The top three providers also captured a high proportion of trading volume with 75.2% collectively of September’s average daily trading volume. SPDR ETFs has the largest share with 42.4%, iShares is second with 28.3%, followed by ProShares with 4.5%.
“ETF competition is about getting the product mix and the ETF Eco System right and not just low costs. We will see some movement in the relative size of the industry heavyweights and while benchmark, performance, trading, liquidity and product structure will continue to be key considerations, costs as we see from the US will be an increasingly important component,” said Deborah Fuhr, Managing Partner at ETFGI.
Benchmarks are an important factor in the selection process when comparing ETFs and ETPs to implement exposure to a desired market segment or asset class. The top 3 index providers account for 54.5% of global assets. S&P Dow Jones has the largest number of ETFs/ETPs tracking their benchmarks with 1,028 products and 25.5% of assets, MSCI with 569 products and 19.7% of assets, followed by Barclays Capital with 178 products and 9.3% of assets. Over 100 other index providers split the remaining 45.5% of assets.
Year-to-date through Q3 2012 Equity ETFs and ETPs have gathered the largest net inflows accounting for US$111 billion, followed by fixed income ETFs and ETPs with US$50 billion and commodity ETFs and ETPs capturing US$17 billion.
Equity focused ETFs and ETPs have gathered US$111 billion YTD, which is US$20 billion more than the NNA flows they received in all of 2011. Products providing exposure to the United States/North American equities have gathered US$63 billion, followed by emerging market equity with US$28 billion and Asia Pacific equity with US$7 billion.
Fixed Income ETFs and ETPs have also proven to be very popular this year with US$50 billion in NNAs, which is US$4 billion more than the total new assets they received last year. Within the Fixed Income universe corporate bond products have gathered the largest net inflows with US$20 billion, followed by high yield products with US$14 billion. Emerging market and broad/aggregate bond exposures each captured just over US$5 billion.
Commodity flows at US$17 billion are nearly US$2 billion more than full year 2011 NNAs. Precious metals have gathered the largest net inflows with US$15 billion, followed by broad commodity products with US$2 billion.
Note to editors
The challenging market conditions currently and over the past few years, combined with the difficulty in finding active managers that consistently deliver alpha, have caused investors to embrace the use of ETFs and ETPs. 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.
ETFs are typically open-ended, index-based funds, with active ETFs accounting for less than 1% market share. They can be bought and sold like ordinary shares on a stock exchange and offer a broad exposure across developed, emerging and frontier markets, equities, fixed income and commodities. ETFs are used widely by institutional and increasingly by financial advisors and retail investors to:
- equitize cash
- implement diversified exposure to a market
- comprise a core or satellite investment
- be a long term strategic investment
- implement tactical adjustments to portfolios
- use as building blocks to create entire portfolios
- allow investors to hedge the market
- use as an alternative to futures and other derivative products
Exchange Traded Products (ETPs) are products that have similarities to ETFs in the way they trade and settle but they do not use an open-end fund structure. The use of other structures including unsecured debt, grantor trusts, partnerships, and commodity pools by ETPs can, in addition to a significantly different risk profile, create different tax and regulatory implications for investors when compared to ETFs which are funds.
Established by industry expert Deborah Fuhr and partners, ETFGI is a wholly independent research and consultancy firm providing services to leading global institutional and professional investors, the global exchange traded fund and exchange traded product industry, its Regulators, its advisers and its investors.
ETFGI produces extensive ETF-specific analysis covering over 4,700 ETFs and ETPs, across 9,500 exchange listings from over 200 providers on 50 stock exchanges.
ETFGI leverages extensive industry experience, unparalleled industry contacts and rigorous analysis to deliver proprietary research on the global ETF and ETP industry.
ETFGI offer a full range of consulting services covering the spectrum of the exchange traded exposure universe from data and analytics to assistance in understanding product structures, due diligence on products and service providers, from distribution and capital market challenges to governance and the regulatory environment. ETFGI provide services to both new and experienced institutional and professional investors interested in using and comparing ETFs and ETPs and better understanding the industry, product, regulatory and company specific data points.
ETFGI will soon be offering an annual paid subscription service which will provide: 1) the monthly ETFGI Global ETF and ETP Industry Insight report, which will provide a detailed analysis of the Global ETF and ETP industry, analysing net new asset flows into asset classes, products and managers, index provider rankings, broker rankings and new product launches, as well as numerous other metrics; 2) a directory of ETFs and ETPs; and 3) access to tools via the soon-to-be launched website www.etfgi.com that will allow investors to search for and compare the nearly 5,000 ETFs and ETPs which have almost 10,000 listings from over 200 providers on 54 exchanges. Investors can subscribe for a country or regional view of the ETF and ETP database if that better suits their investment or research requirements.
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