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ETFs inflows signal growing trend

The amount of money flowing into exchange-traded funds (ETFs) rose between the first eight months of 2011 and the first eight months of 2012, according to data provided by BlackRock, the world's largest asset manager.The amount of money flowing into exchange-traded funds (ETFs) rose between the first eight months of 2011 and the first eight months of 2012, according to data provided by BlackRock, the world's largest asset manager.

Surging assets

The amount of new global inflows into ETFs totaled $127.7 billion in the first eight months of 2012, which represented a 15.7 percent increase over the first eight months of 2011, The Financial Times reports.

As a result of these investments in the funds, ETFs now have $1.8 trillion in assets under management, and market experts predict that the sum will likely grow significantly, according to the news source. These individuals have forecasted that these funds will have as much as $20 trillion under management by 2020.

"Across the globe, more and more investors are turning to ETFs as the go-to vehicle for efficient, transparent and low-cost market exposures," stated Mark Wiedman, global head of iShares, a leading ETF manager and unit of BlackRock, according to the news source.

ETF flows across different regions

The new inflows into Asian ETFs have spiked 38.4 percent between the two periods, compared to inflows into U.S. ETFs that have risen by almost one-third, the media outlet reports. Europe has served as a contrast to these strong gains, with inflows into the region plunging 43.9 percent as euro zone fiscal issues made investors more risk averse and distorted asset markets.

New regulations that protect the interests of European investors should help to clear up this ambiguity when the rules are issued in July, according to the news source. Companies providing synthetic ETFs have not faced substantial challenges. While these derivatives-based financial instruments have generated criticism from various financial institutions, the turmoil has dissipated.

Contributors to rising inflows

Many different variables have been cited when explaining why these substantial inflows into ETFs have happened. The media outlet reports that there is a growing number of people who are not happy with the performance of active managers, and the ability that fees have to lower returns are becoming known by more and more retail investors. In addition, a new class of financial advisors who focus on fee-based planning and make these funds a crucial part of their recommendations has sprung up.

MarketWatch reports that the growing demand for ETFs has created a rising number of the funds and, since some of them generate poor returns, investors must beware these bad apples. 

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