Assets invested in global exchange traded funds hit record $10.32tn

Assets invested in global exchange traded funds have hit a record of $10.32tn off the back of rallying stock markets and resilient inflows.

The figure exceeds the $10.26tn mark set at the end of 2021 when markets peaked before Russia’s invasion of Ukraine and a global surge in inflation, according to data from ETFGI, a consultancy.

“Investor acceptance and preference for ETFs is strong and continuing, and the market move has pushed the ETF industry to record highs,” said Deborah Fuhr, managing partner of ETFGI.

Although aided by this year’s market rebound, Fuhr said the milestone was “testament” to the success of the ETF structure.

The ETF industry has hit a new peak while the US benchmark equity S&P 500 index is still 7 per cent below its early January 2022 record and the MSCI All Country World Index is 9 per cent off its high. Likewise, the FTSE World Government Bond Index is trading 23 per cent below its high of late 2020.

ETFs have also fared better than other fund structures: US mutual fund assets, for example, were $23.5tn at the end of April, according to the Investment Company Institute. This is 12.8 per cent below the $27tn they reached at the end of 2021.

Most ETFs are similar to mutual funds, in that they hold broad portfolios of stocks, bonds or commodity futures contracts, although some newer vehicles invest in alternative assets such as cryptocurrencies or derivatives, or hold leveraged exposure to single securities.

However they trade on a stock exchange, offering intraday liquidity, and are typically more transparent, cheaper and, in the US, more tax efficient, than mutual funds.

On a global basis, ETFs have seen 48 consecutive months of net inflows, according to ETFGI’s data. “There is no other product out there that can say that,” Fuhr said.

“It’s a sign of resilience and that ETFs have become a core part of many investors’ portfolios,” said Todd Rosenbluth, head of research at VettaFi.

“In 2022 when most ETFs declined in value we saw robust inflows and as investors have seen stronger returns in 2023 they have added to existing positions or added new positions.”

These investments, combined with recovering markets, have helped ETFs set records across a range of individual markets, as well as globally.

In the US, assets have hit $7.27tn, compared to $7.21tn at the end of 2021; in Europe they are at $1.62tn, against a previous peak of $1.6tn; and in Canada $277bn is now held in ETFs, above the historic peak of $273bn. Some countries, such as Japan, remain below their previous highs, however.

The rapid growth of actively managed ETFs, albeit from a low base, has allowed the industry to expand from its traditional index-tracking core.

Investors poured a net $609bn into US-listed ETFs last year, even as the market tanked and a record $1.1tn was pulled from US-domiciled mutual funds, according to ICI data.

Despite this year’s market recovery, global net ETF flows slowed to $273bn in the first five months of the year, according to ETFGI, down from $418bn in the same period in 2022 and a record $572bn in 2021.

Nevertheless, Rosenbluth said: “The future looks very bright for ETFs to continue to set milestones in future years.”

“Investors have continued to put fresh money to work using ETFs to get exposure to a range of investment styles. For US investors it’s the way they are accessing international equities and certain investment styles that are hard to obtain through individual securities.”