ETFs and other ETPs globally gathered $867 billion in net new assets during 2022, according to data from BlackRock.

The ETF industry posted its second-highest annual net inflows in 2022.

Marking the second-highest annual net inflows on record, behind 2021’s bumper inflows of $1.3 trillion, investor demand for the ETF structure remained robust despite a year of global economic headwinds, rapid central bank tightening, and surging volatility in equity and bond markets.

Delving into the flows, BlackRock notes it was another standout year for fixed income ETFs which attracted their third-highest annual net inflows of $220bn, not too far off the $280bn and $269bn gathered in 2021 and 2020, respectively.

Over two-thirds (68%; $190bn) of flows within the fixed income asset class in 2022 went into government bond ETFs, more than 300% higher than the previous year and exceeding the combined net inflows between 2019 and 2021, as investors sought to position their portfolios amid rapidly changing interest rates. The vast majority ($167bn) of these flows went into ETFs providing exposure to US interest rates, while investors favoured the front end of the yield curve with short-duration exposures gathering $66bn.

Interest in corporate credit ETFs was mixed with investment-grade funds adding $40bn over the year compared to outflows of -$5.6bn across the high yield space. Sentiment towards investment-grade credit ramped up in the second half of the year ($30bn net inflows), while demand for high yield only turned sharply positive in the final quarter ($14bn net inflows – prior to this, high yield was on track for a record outflow year).

Meanwhile, fixed income ETFs targeting inflation-linked bonds and emerging market debt experienced significant net redemptions of -$14bn and -$9bn, respectively.

Turning to equity ETFs, despite the broad risk-off sentiment throughout the year, the asset class also registered its second-highest annual net inflows of $598bn (although the total was someway off the $1.0 trillion net inflows recorded in 2021).

US equity ETFs drove buying activity with $340bn net inflows while, perhaps more notably, emerging market equity ETFs saw their largest inflow year on record with $110bn added (compared to $90bn in 2021). Flows into emerging market ETFs were led by Chinese equity ($64bn) and global ($15bn) exposures. In contrast, European equity ETFs saw their third-largest outflow year on record with -$17bn net assets shed over 2022, highlighting investor concerns regarding inflation and the proximity to the ongoing war in Ukraine.

Examining flows within sector ETFs, BlackRock notes that defensive stalwarts were the asset-gathering winners of 2022 with technology ($26bn net inflows), healthcare ($20bn), and utilities ($6bn) taking the top three spots – setting new records for the latter two exposures. Sizable Q1 net inflows into energy ($8bn) and financials ($3bn) were quickly unwound in the following months with financials ETFs in particular setting record outflows of -$16bn over the year.

An expected tilt towards the quality factor was less pronounced in flow trends with buying split evenly between quality ($14bn), value ($14bn), and minimum volatility ($12bn) factor ETFs. Trends beneath the surface, however, showed more stable buying for quality ETFs which recorded positive net new assets in 11 months across the year.

Demand for ESG-tailored ETFs also remained strong in 2022 with the segment garnering $60bn net new assets across the US and Europe, although the figure is less than half the record inflows of $139bn in the previous year. EMEA-listed sustainable ETFs once again led the way with $54bn added while total flows into their US-listed peers were a more muted $5bn.

Interestingly, ESG-optimised strategies proved most popular within sustainable equity ETFs with $12bn net inflows recorded, while fixed income investors preferred best-in-class ESG strategies which led the way with $19bn added.