Assets invested globally in Exchange Traded Funds (ETFs) and Exchange Traded Products (ETPs) broke through the $2 trillion milestone at the end of January 2013 to reach a new all-time high of $2.05 trillion. ETF and ETP assets have increased by 5.2% from $1.95 trillion to $2.05 trillion during January, according to figures from ETFGI’s monthly Global ETF and ETP industry insights.
Market performance contributed to the increase in the value of assets held in ETFs and ETPs as 18 of the top 20 markets globally showed gains in January. Two of the markets with strong gains were the US and the UK where history has shown that a strong January tends to be a good predictor for the rest of the year. A review of history in both markets shows that strong January performance is typically followed by positive returns in the subsequent 11 months.
The FTSE 100 index was up 6.5% in January, which ranks as the best start to the year since 1989. According to FTSE, 14 of the 17 Januaries with positive performance since 1984 (when the index was launched) were followed by 11 months of positive returns. Similarly, the S&P 500 index was up 5.0% in January, which ranked as the 12th best January since 1950 and the 19thJanuary since 1950 when the index was up more than 4%. Again, since 1950, January gains of at least 4% in the S&P 500 have been followed on average by gains of 15.1% in the subsequent 11 months of the year. Only once since 1950 did the S&P 500 rise by more than 4% in January and then finish the year lower than it did at January’s end – and that was in 1987.
Investors allocated $34.5 billion of net new assets to equity ETFs and ETPs in January. This continues a trend that began in December 2012 when $36.2 billion of net new assets were allocated to equity ETFs and ETPs. Overall, $37.3 billion of net new assets were allocated to ETFs and ETPs in January 2013, an 8% increase on the $34.5 billion of net inflows in January 2012 and in line with the $37.8 billion in December 2012. During January 2013, fixed income ETFs and ETPs gathered just $1.4 billion while commodity ETFs and ETPs saw net outflows of $411 million.
“The flows into equity ETFs and ETPs show an increasing investor confidence as global economic concerns over corporate earnings, US debt ceiling, US housing market, US job outlook and the outlook for the Eurozone seem to be improving,” says Deborah Fuhr, Managing Partner at London-based ETFGI. “Additionally, there are signs of a rotation out of fixed income into equities.”
Equity focused ETFs and ETPs providing exposure to North America were the most popular this January, receiving $14.6 billion. Emerging market equities were in second place with $10.7 billion and global (ex-US) equity exposure came in third with $3.0 billion.
Fixed Income ETFs and ETPs gathered only $1.4 billion, with $1.2 billion invested in high-yield exposure and $720 million in corporate bond ETFs and ETPs. Government bond, money market and mortgage-backed products experienced net outflows of $544 million, $332 million and $302 million respectively.
Commodity ETFs and ETPs had net outflows of $411 million over the course of January. ETFs and ETPs providing exposure to precious metals experienced net outflows of $1.4 billion and energy ETFs and ETPs had net outflows of $453 million. Meanwhile investors moved $964 million into ETFs and ETPs offering broad commodity exposure.
“A growing number of institutional investors, financial advisors and retail investors are embracing the use of ETFs and ETPs for strategic and tactical asset allocations,” says Fuhr. “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."
At the end of January there were 4,766 ETFs and ETPs with 9,813 listings and assets of $2.05 trillion. The products were from 209 providers and were listed on 56 exchanges. iShares gathered the largest net new ETF and ETP inflows in January with $14.5 billion followed by Vanguard with $11.4 billion while SPDR ETFs experienced net outflows of $1.5 billion. iShares is the largest ETF/ETP provider in terms of assets with $798.5 billion, reflecting 39.0% global market share; SPDR ETFs is second with $347.3 billion and 16.9% market share; and Vanguard is third with $265.5 billion and 13.0% market share. These top three ETF/ETP providers account for $1.41 trillion, or 68.9%, of global ETF/ETP assets, while the remaining 206 providers each have less than 4% market share.