The Invesco S&P 500 UCITS ETF has reached USD10 billion of assets under management (AUM), becoming the first of the firm’s ETFs listed in Europe to reach that milestone. With USD500 million of net new assets raised in the first six weeks of 2020, demand so far this year seems to be continuing from the strong trends experienced in 2019.
The Invesco fund took in almost half of all net inflows into S&P 500 ETFs in 2019, accounting for USD3.4 billion of the total USD6.9 billion. The strong growth relative to the rest of the market can be attributed to the fund’s low overall cost and outperformance it has delivered versus the index.
Doug Sharp, Senior Managing Director and Head of EMEA at Invesco, says: “Last year was a landmark for the European ETF industry as total assets hit the USD1 trillion mark. It was also a record year for our business with just under USD12 billion of net inflows, the third-highest total in Europe. We have seen solid demand for new and innovative products as well as for what you could call ‘core building blocks’ as investors are using ETFs to meet a variety of needs throughout their portfolios.
“The growth in our S&P 500 UCITS ETF, particularly over the past year, indicates that investors are also becoming more aware of the differences between ETFs and how, even for the largest and most liquid benchmarks on the planet, picking the right one can make a material difference in terms of performance.”
Gary Buxton, Head of EMEA ETFs at Invesco, explains: “Investors wanting exposure to simple benchmarks generally look first at how much it is going to cost. Our range of portfolio building blocks have some of the lowest costs and best tracking in Europe for core benchmarks. For example, our S&P 500 UCITS ETF has a management fee of just 0.05% per annum and bid-offer spreads typically two to three basis points, meaning it has the lowest all-in cost of the largest competing products in Europe.
“When you are looking for passive exposure to US equities, however, there is more than just cost to consider. Our synthetic replication method enables us to capture all the dividends, gross of tax, on the index constituents. This gives it a clear structural advantage over physically replicating ETFs that must pay dividend withholding tax, which is measurable in terms of performance.”
The strong flows into synthetic S&P 500 ETFs in 2019 amid weaker demand for physical versions suggest investors are becoming more agnostic to the replication method. Investors appear to be selecting products not only on cost but also on which specific product offers the greatest potential for delivering the desired outcome.