Investors have poured into exchange-traded funds (ETFs) in the June quarter, pushing the global investment product sector to almost reclaim record high assets under management (AUM).
During the second quarter of 2020 total ETF AUM jumped by nearly US$1 trillion as solid flows coincided with the fastest market rebound on record, Australian provider BetaShares reported last week.
“The global ETF industry emerged from the turmoil in a relatively strong position,” the BetaShares report says. “After falling ~16% in the first quarter, assets under management (AuM) in global ETFs recovered to finish the second quarter up 16.9% at US$6.28T – the third-highest end-of-quarter figure on record, and some ~$80B away from the record close at the end of 2019.”
Over the three months to June 30, global ETF inflows amounted to about US$175 billion, BetaShares says, comprising fixed income (US$97 billion), commodities (US$34 billion) and equities (US$20 billion).
Globally, the almost US$100 billion flowing into fixed income ETFs was the stand-out asset class trend for the quarter after attracting just US$9 billion in the previous period.
ETF investors favoured technology, healthcare and ‘thematic’ sectors in the June quarter while commodities, especially gold, saw the biggest year-on-year flow changes.
“Global commodity ETFs have taken in ~US$54B in new money for the six-month period to the end of June 2020, a fifteen-fold increase on the $3.5B in inflows in the first six months of 2019,” BetaShares says.
“In the U.S. over the 12 months to the end of June 2020, commodity ETFs received inflows of ~$45B, five times the $8.5B in inflows seen in the previous 12 months.”
In the US at least, investors have shown an overwhelming preference for ETFs in general with about US$135 billion of inflows compared to $4 billion of outflows from the traditional managed fund sector.
And ETFs dominated the index-investing crowd in the US, pulling in roughly US$120 billion of inflows compared almost US$30 billion exiting passive managed funds during the June quarter.
“Passive strategies continued to be favoured during the quarter, with ~US$92B flowing into passive investments, compared to ~US$39B into active investments,” the BetaShares report says.
Despite the overwhelming investor appetite for index strategies, the June quarter data shows “for the first time, the number of active ETFs launched has so far exceeded the number of passive ETFs launched”.
Similarly, the report, authored by BetaShares head of marketing Ilan Israelstam, shows the ETF product machine is starting to wind back after years of expansion.
“For the first time, ETF closures have exceeded launches, with ~150 ETFs shut down so far this year (to 30 June), while ~130 have been launched,” the paper says.
As at the end of June, the collective ETF and exchange-traded product market included 8,181 funds issued by 468 providers across 79 exchanges and 59 countries.