New asset inflows into global exchange-traded funds and exchange-traded products hit an all-time high of USD188bn year-to-date through end of Q3 2012, which is USD18bn more than the prior record of USD170bn gathered in 2011, according to ETFGI.
Assets in global ETFs and ETPs reached a new record high of USD1.86trn at the end of Q3, surpassing the prior record of USD1.76trn set at the end of August 2012.
Year-to-date through end of Q3 assets have increased by 21.7 per cent from USD1.53trn to USD1.86trn 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 per cent of assets, net new assets and trading volumes. Assets invested in ETFs and ETPs have grown at 26.5 per cent CAGR over the past 10 years. The US accounts for 70.1 per cent of the USD1.86trn in global assets, Europe represents 18.8 per cent and Asia Pacific (ex-Japan) 3.9 per cent, leaving 7.2 per cent for the rest of the world.
The top three providers collectively hold 68.7 per cent of global assets. iShares ranks first with 38.3 per cent, SPDR ETFs is second with 18.0 per cent and Vanguard third with 12.4 per cent. There is a 9.1 per cent gap between third place and DB/x-trackers in fourth with 3.4 per cent 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 and 71 per cent 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 per cent of all of NNAs, with iShares accounting for 26.7 per cent, Vanguard 22.8 per cent and SPDR ETFs 15.5 per cent. The top three providers also captured a high proportion of trading volume with 75.2 per cent collectively of September’s average daily trading volume. SPDR ETFs has the largest share with 42.4 per cent, iShares is second with 28.3 per cent, followed by ProShares with 4.5 per cent.
“ETF competition is about getting the product mix and the ETF Eco System 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,” says 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 per cent of global assets. S&P Dow Jones has the largest number of ETFs/ETPs tracking their benchmarks with 1,028 products and 25.5 per cent of assets, MSCI with 569 products and 19.7 per cent of assets, followed by Barclays Capital with 178 products and 9.3 per cent of assets. Over 100 other index providers split the remaining 45.5 per cent of assets.
Year-to-date through Q3 2012 equity ETFs and ETPs have gathered the largest net inflows accounting for USD111bn, followed by fixed income ETFs and ETPs with USD50bn and commodity ETFs and ETPs capturing USD17bn.
Equity focused ETFs and ETPs have gathered USD111bn YTD, which is USD20bn more than the NNA flows they received in all of 2011. Products providing exposure to the US/North American equities have gathered USD63bn, followed by emerging market equity with USD28bn and Asia Pacific equity with USD7bn.
Fixed income ETFs and ETPs have also proven to be very popular this year with USD50bn in NNAs, which is USD4bn 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 USD20bn, followed by high yield products with USD14bn. Emerging market and broad/aggregate bond exposures each captured just over USD5bn.
Commodity flows at USD17bn are nearly USD2bn more than full year 2011 NNAs. Precious metals have gathered the largest net inflows with USD15bn, followed by broad commodity products with USD2bn.