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Global ETF assets break through USD1trn milestone

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Global exchange-traded funds assets hit an all time high of USD1trn at the end of December 2009, 45.2 per cent above USD710.9bn at the end of 2008, according to the latest figures from BlackRock.

The global ETF industry had 1,939 ETFs with 3,775 listings, and assets of USD1,032bn from 109 providers on 40 exchanges around the world at the end of December 2009.

Year-to-date assets have risen by 45.2 per cent, which is more than the 27.0 per cent rise in the MSCI World Index in US dollar terms.

BlackRock says the challenging market conditions of 2008 caused a significant shift in investors’ risk appetite in their evaluation of counterparty risk and their desire for liquidity.

During 2009 many investors found that ETFs met their desire for greater transparency in relation to the issues of cost, transparency of holdings, transparency of price, liquidity, product structure, risk and return as they relate to investment alternatives.

Deborah Fuhr, global head of ETF research and implementation strategy at BlackRock, says: “In a world where investment products come and go with the blink of an eye, ETFs might be considered one of the most innovative financial products in the last two decades. They have fundamentally changed how both institutional and retail investors construct their investment portfolios.

“ETF providers have continued to expand their product ranges in more specialised areas to cater for the growing number of professional and retail investors using ETFs as advanced portfolio construction tools. The increasing availability of these highly-specialised ETFs across the full spectrum of equities, fixed income and alternative investments now ensures that investors can use ETFs to instantly reallocate capital to take advantage of new investment opportunities.”

Over the past decade the compound annual growth rate for ETF assets globally was 56.3 per cent. It was 58.1 per cent in the US, 53.1 per cent in Canada and 90.5 per cent in Europe.

Capital flows this year within ETFs also demonstrate how these investment products have become important bellwethers to gauge shifts in investor sentiment between asset classes. During the year, fixed income, equity and commodity-based ETFs enjoyed heavy inflows as some investors adjusted their risk profiles. In the beginning of the year, given rising levels of risk aversion, ETFs tracking equity markets perceived as higher risk suffered much of the capital outflow, notably Asian and global (excluding US) equities.

After the markets turned in March, and kept rising through year-end, investments moved back into areas that had been shunned for the preceding year and a half.

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