The recent growth in ETFs has seen the sector record an inflow of capital from investors globally. In addition, the growth saw the ETFs asset under management hit an all-time high in 2020.
According to data acquired by Finbold.com, the value of assets under management by global ETFs has soared 56.22 per cent between 2016 and 2020 from USD3.32 trillion to USD7.99 trillion. One of the highest growth rates was between 2018 and 2019 at 32.6 per cent, from USD4.6 trillion to USD6.1 trillion.
Elsewhere, over the five years, the number of ETFs globally also grew 56.22 per cent, from 4,866 to 7,602. Between 2019 to 2020, the ETFs also surged 12 per cent, to record one of the biggest growth rates over the period.
Pandemic’s role in ETF growth
The report highlights the 2020 growth trend that saw ETFs peak in the last five years and the possible drivers. According to the research report: “Notably, both the value of assets under management and the number of ETFs hit their peak in 2020 despite the economic meltdown initiated by the coronavirus pandemic. In general, the health crisis impacted the investing world, with people showing interest in conscious investing, and ETFs provided one of the best avenues.”
Furthermore, the report explores the possible near-term and long-term ETF sector outlook. The report notes that: “Based on the recent growth trend in ETFs, the sector will potentially keep soaring in the near term, with more products coming up. At this point, the skepticism regarding ETFs potentially collapsing in the wake of a financial crisis is fading away. However, with the ever-changing technologies that are reshaping the financial markets, the long-term future of ETFs remains to be tested.”
In general, ETF popularity will be driven by perennial factors like low cost, transparency, tax-efficient and ease to trade.