and ETP assets have increased by 15.5% from US$1,526 Bn to US$1,762 Bn.
Over the past 10 years the compounded annual growth rate (CAGR) of these products globally has been 26.5%. There are currently 4,713 ETFs and ETPs, with 9,620 listings, assets of US$1,762 Bn, from 204 providers on 56 exchanges.
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
“In a world where investment products come and go in the blink of an eye, ETFs have proved that they are here to stay and might be considered one of the most innovative financial products in the last two decades. They are one of the few products that are offered on the same terms to both retail and institutional investors
Market volatility may be making investors wary about the stock market, but they continue to find exchange-traded funds and other exchange traded products useful tools,” said Deborah Fuhr, Managing Partner at ETFGI.
Capital flows this year within ETFs also demonstrate how these products have become important indicators to gauge shifts in investor sentiment between and among asset classes. Year to date through end of August 2012, ETFs and ETPs saw net inflows of US$143 billion which is US$23 billion above the level of net new assets at this time last year. Equity ETFs and ETPs have gathered the largest net inflows accounting for US$76 billion, followed by fixed income ETFs and ETPs with US$47 billion and commodity ETFs and ETPs capturing US$10.5 billion.
Fixed Income ETFs and ETPs have also proven to be very popular this year with US$47 billion in net new assets, which is US$1 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$18.5 billion, followed by high yield products with US$11 billion and broad/aggregate bond exposures with US$4.9 billion.
Equity focused ETFs and ETPs have gathered US$76 billion which is US$7 billion more than this time last year. Products providing exposure to the United States/North American equities have gathered US$39 billion, followed by emerging market equity with US$22 billion and Asia Pacific equity with US$7 billion.
Commodity flows at US$10.5 billion are slightly lower than this time last year. Precious metals have gathered the largest net inflows with US$9.5 billion, followed by broad commodity with US$1.3 billion and energy with US$901 million. Agriculture experienced the largest net outflows at US$1.2 billion.
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.
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 ecosystem, its Regulators and its advisers.
Founded in 2012 by ETF and ETP strategist, Deborah Fuhr and partners, ETFGI produces extensive ETF-specific analysis covering over 4,700 ETFs and ETPs, across 9,500 exchange listings.
ETFGI LLP 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 product structuring, 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 ETFs and ETPs and better understanding the industry, product, regulatory and company specific data points.
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