Assets in BlackRock’s exchange-traded fund business surpassed the $ 3 billion mark for the first time in May, as global ETF industry assets hit a new record high of over $ 9 billion.
BlackRock predicted last week that ETF industry assets would reach $ 15 billion by the end of 2025, aided by growing demand for eco-friendly strategies and increased investor use of debt.
ETFs currently only represent 3% of assets held in the world’s stock and bond markets, according to BlackRock.
“There are decades of growth ahead for ETFs,” said Salim Ramji, global head of iShares and index investments at BlackRock.
Wall Street’s record rally since April 2020 and large gains in other stock markets have generated new business for the ETF sector where the two main rivals, BlackRock and Vanguard, are waging a fierce price war.
Investors around the world invested nearly $ 97 billion in ETFs in May across funds and products, bringing net inflows to $ 559.3 billion so far this year – on track to break the record of $ 762.8 billion in 2020, according to preliminary data from ETFGI, a London-based consultancy. .
BlackRock’s iShares ETF arm generated net inflows of $ 123.7 billion in the first five months of this year, up from $ 37.4 billion in the same period in 2020, when investor confidence fell. shaken by the escalation of the coronavirus pandemic.
Pennsylvania-based Vanguard has so far attracted $ 161 billion in ETF inflows in 2021, more than double the $ 66.2 billion recorded between January and the end of May of last year. About $ 5.2 billion of Vanguard’s U.S. mutual fund inflows so far this year are the result of a deal that allows clients to convert an existing mutual fund into an ETF.
The global shift over the past decade towards low-cost ETFs that track broad benchmarks, such as the S&P 500 or the FTSE 100, has created intense pressures in the investment industry, fueling mergers and acquisitions as smaller competitors scramble to meet the growing BlackRock and Vanguard power.
“We are witnessing a tectonic shift with the growth of ETFs that will drive significant changes in the investment industry globally,” said Deborah Fuhr, Founder of ETFGI.
Patrick Davitt, analyst at Autonomous Research, said ETF penetration could become “considerably higher” in Europe and Asia as well as bond markets, challenging traditional active fund managers.
“It is a very difficult task for active equity managers [due to their inconsistent performance and higher fees] to gain significant entries against ETFs. Traditional actively managed bond funds will also face increased competition from ETFs, ”Davitt said.
ETF assets managed by State Street Global Advisors broke the $ 1 billion mark in April. The Boston-based investment manager, the third-largest ETF player behind BlackRock and Vanguard, has posted inflows of $ 32.9 billion so far this year, up from $ 19.3 billion in the first five months from 2020.
Rory Tobin, State Street’s Global Head of ETFs, said that “the entire ETF ecosystem is becoming increasingly powerful” as adoption spreads beyond the United States and uptake is growing across a wide range of trading and advisory platforms.
“The growth trends in Europe are very encouraging and we have only just scratched the surface for ETF adoption in Asia,” said Tobin.