In what it describes as a breakout year for ETFs and indexing, BlackRock Inc.’s iShares business reports expansion at its fastest pace ever, collecting a record USD246 billion in new flows, 19 per cent over 2016’s 13 per cent inflows of USD140 billion, pushing the global ETF industry AUM past USD4.5 trillion for the first time.
iShares AUM closed the year at USD1.754 trillion, including USD1.33 trillion in equities and USD427 billion in fixed income and commodities.
The firm writes that global investors drove record growth in US iShares, with net inflows of USD201 billion. “US individual investors and financial advisers drove exceptional growth this year, as the shift to fee-based wealth management encouraged use of low-cost portfolio funds. Institutions accelerated their usage of iShares across asset classes and in tactical and buy-and-hold portfolios.
“Bought by investors across Europe, Asia, and Latin America, European UCITS iShares saw organic growth of 15 per cent with a record USD41billion of net inflows. European iShares crossed USD300 billion AUM this year, closing the year at USD359 billion.”
Fixed income ETFs also saw growth with more investors viewing bond ETFs as integral parts of a modern bond portfolio. “Use of bond ETFs as trading instruments expanded as bond markets continued to evolve from exclusively over-the-counter, dealer-intermediated trading to more open, ‘all-to-all’ networks.”
Net inflows for iShares’ fixed income products grew at 13 per cent, with more than USD68 billion in new flows. Bond ETFs are on pace to hit USD1.5 trillion by 2022, the firm says.
Global iShares Core funds crossed USD500 billion to USD514 billion in assets under management, growing at 58 per cent, adding a record USD123 billion in global net inflows as retail and institutional investors sought value and quality for their long-term foundational holdings. In the US, iShares Core grew its market share to 41 per cent, totalling USD105 billion in flows for the year.
iShares Core series has gathered USD273 billion since the product series was launched in 2012. The firm notes that institutions continued to expand usage of iShares ETFs as financial instruments, alongside swaps, futures, and single-name securities, and as a reference asset for OTC and listed derivatives. In terms of smart beta ETFs, iShares offers 142 smart beta ETFs with USD108 billion in AUM.
Mark Wiedman, Global Head of iShares and Index Investments at BlackRock, says: “Tens of millions of individual and institutional investors have chosen iShares ETFs to invest with simplicity, ease, choice, and at low cost.
“We project the global ETF market to more than double in assets under management by 2022. Three global trends should power this growth: fee-based wealth management, networked bond and derivatives trading, and alpha-seeking usage by active fund and wealth managers.”
Stephen Cohen, Head of iShares EMEA at BlackRock, says: “As the impact of MiFID II rules resound across the region we believe the European ETF industry is set for a new phase of growth. Our European range remains the go-to for investors seeking both broad market exposures for the core of portfolios, and tactical tools for managers to adjust portfolio return profiles. In 2017, we stayed laser focused on providing investors with greater investment flexibility by building a suite of 35 income treatment and currency-hedged share classes, launching market firsts such as the physical-replicating Global Aggregate bond fund and helping clients tap into economic development stories using the likes of our Robotics ETF.”
