Global investors have poured a record amount into exchange-traded funds (ETFs) during the first two months of 2021, according to industry data.
UK-based consultancy firm, ETFGI, clocked about US$222.5 billion of net flows into the sector globally over January and February, over twice the figure for the same period in 2020, the Financial Times reported.
In February ETF flows hit an all-time monthly high of US$132 billion, almost 6 per cent about the previous top achieved last November.
Deborah Fuhr, ETFGI founder, said in the FT report that the “ETF industry has now registered a monthly record for new inflows for a second time in just four months”.
The spectacular rise of the mainly passive-tracking listed fund sector over the last few years took global ETF assets under management through the US$8 trillion mark this January, ETFGI data shows, adding US$1 trillion since August 2020. Global ETF assets stood at about US$6.3 trillion at the end of 2019 compared to less than US$2 trillion in December 2012.
Market leaders Vanguard and the BlackRock-owned iShares pocketed most of the flows this year, raking in a respective US$63 billion and US$42.3 billion for the two months to the end of February.
However, Ark Invest, the ‘disruptive innovation’ specialist part-owned by Nikko Asset Management, was third in the ETF asset race with net inflows of just above US$16 billion compared to the US$20.5 billion the manager accrued during the 2020 calendar year.
“The strong inflows for Ark have helped to push global assets in actively managed ETFs beyond the $300bn milestone,” Fuhr said in the FT article.
Ark funds have whipsawed in March as market volatility hit the tech sector, in particular.
NZ has also felt the ETF fever of late as strong flows and market returns took the local sector grow more than $1 billion over the last 12 months.
The NZX-owned Smartshares ETFs (the sole NZ provider) reported assets under management of more than $4.5 billion at the end of February compared to just under $3.5 billion on December 31, 2019.
While the February Smartshares ETF figure was slightly below the January high of $4.6 billion plus due to NZ share market weakness, NZX fund chief, Hugh Stevens, said net investor flows had been consistently high.
Smartshares figures show ETF monthly trades ranged between about 77,000 and 113,000 since the first spike last March that coincided with general surprise retail share surge at peak COVID panic.
While Smartshares trading numbers slipped slightly in the back-end of 2020 from the June high of almost 113,000, 2021 has seen another jump up in as the NZX booked about 95,000 and 91,000 ETF trades in January and February, respectively.
Secondary trading of Smartshares ETFs now represents more than 4 per cent of all NZX main board value, according to the latest market statistics.
Stevens said the NZX had also been building out the ETF infrastructure, recently adding a new market-maker – Jarden – to the existing player, Craigs Investment Partners, as well as automating the process with Bloomberg technology.
“Having two market-makers brings further liquidity and even tighter spreads to the Smartshares ETFs,” he said.
Market-makers can now create the underlying ‘baskets’ of ETF stocks via the fully-automated Bloomberg service, creating major efficiencies compared to the previous manual system, Stevens said.
Smartshares currently offers over 30 ETFs but could expand the product suite further, he said.
“We would only add a new ETF if we had a reasonable view that the market would support the product,” Stevens said.
The Australian ETF market also saw some action last week as US private equity firm, TA Associates, took a controlling stake in the hyperactive BetaShares.
TA – part-owner of Fisher Funds, Russell Investments and Yarra Capital (now including the Nikko Australia business) – bought the 51 per cent share of BetaShares previously held by South Korean firm, Mirae Asset Financial Group.
In a statement, Edward Sippel, head of TA Asia-Pacific, said BetaShares was poised “to take advantage of significant opportunities in the market, particularly as the broader financial services industry is undergoing a period of disruption and change”.
“We look forward to partnering with BetaShares’ management team to help further accelerate the company’s growth by leveraging its existing, highly-regarded offering, expanding its product depth, and enhancing its geographic footprint through acquisitions and strategic investments,” Sippel said.
BetaShares was previously exploring options to expand into the NZ market.