Net new asset inflows into global Exchange Traded Funds (ETFs) and Exchange Traded Products (ETPs) hit a record high of $188 billion year-to-date through end of Q3 2012, according to research from ETFGI LLP, an independent research and consulting firm. This figure is $18 billion more than the prior record of $170 billion gathered in 2011.
Deborah Fuhr, Co-Founder and Managing Partner of ETFGI
These inflows helped assets in global ETFs and ETPs to reach an all-time record high of $1.86 trillion at the end of Q3, surpassing the prior record of $1.76 trillion set at the end of August 2012.
Year-to-date through end of Q3 assets have increased by 21.7% from $1.53 trillion to $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 $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 three 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 three.
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 ecosystem 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 three 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 $111 billion, followed by fixed income ETFs and ETPs with $50 billion and commodity ETFs and ETPs capturing $17 billion.
Equity-focused ETFs and ETPs have gathered $111 billion year-to-date, which is $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 $63 billion, followed by emerging market equity with $28 billion and Asia Pacific equity with $7 billion.
Fixed Income ETFs and ETPs have also proven to be very popular this year with $50 billion in NNAs, which is $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 $20 billion, followed by high-yield products with $14 billion. Emerging market and broad/aggregate bond exposures each captured just over $5 billion.
Commodity flows at $17 billion are nearly $2 billion more than full year 2011 NNAs. Precious metals have gathered the largest net inflows with $15 billion, followed by broad commodity products with $2 billion.