Exchange traded funds had a banner year for growth and inflows in 2021 as markets continued to expand. The growth of these entities was particularly strong in the decade after 2008 when central banks turned on the monetary taps.
The global exchange traded funds industry ended 2021 with a record $10.27 trillion in assets and record net inflows of $1.29 trillion, industry figures show.
During December the industry gathered net inflows of $154.97 billion, bringing 2021 net inflows to a record $1.29 trillion, above the $762.77 billion gathered in 2020, according to ETFGI, a firm tracking the sector.
By comparison, among European UCITS and Alternative Investment Funds, for example, total net assets reached €21.387 trillion ($24.12 trillion) at the end of October last year. Globally, based on figures published last year (figures for the whole of 2021 are not yet out), the total size of the asset management industry, covering traditional and newer sectors, was more than $103 trillion (Boston Consulting Group).
Within the total mix, ETFs and exchange-traded products have expanded rapidly, although not yet the majority of the total. They give investors the ability to tap into markets in one hit, or to fine-tune exposures to themes, sectors and sources of return in a far simpler way than before. The growth of ETFs proved particularly strong in the decade after the 2008 financial crisis when cheap liquidity helped markets rise, playing to the strengths of beta investing as opposed to alpha-pursuing structures such as active funds.
ETFs are typically open-ended, index-based funds. ETPs, on the other hand are like ETFs in the way that they trade and settle, but do not use an open-end fund structure.
The ETFGI report said the top three ETF providers, out of 608, accounted for 65.7 per cent of the $10.27 trillion global assets. The top player, by assets, is iShares, making up 32.3 per cent of market share; Vanguard ranks as second at 21.8 per cent, and then SPDR ETFs with 11.7 per cent market share.