Exchange Traded Product Inflows Double
Friday, May 27, 2011

Exchange traded products (ETPs) attracted USD41.4bn of net new assets in Q1, more than double the level of 2010's first quarter, according to BlackRock.

A report recently published by the BlackRock group shows that at the end of the first quarter, the global exchange traded fund (ETF) industry had 2,605 products with 5,905 listings from 142 providers on 48 exchanges around the world. This compares with 2,131 products with 4,133 listings and assets of USD1.082 trillion from 123 providers on 42 exchanges at the end of 2010's first quarter.

Combining ETFs and ETPs, there were 3,724 products with 7,740 listings, and assets of USD1.583 trillion from 178 providers on 52 exchanges around the world at the end of the first quarter. This compares with 2,849 products with 5,158 listings, and assets of USD1.235 trillion from 147 providers on 44 exchanges at the end of first quarter 2010.

Global assets under management (AUM) in ETFs increased 6.7% in 2011‘s first quarter, and now total USD1.399 trillion.

"Net inflows in the first quarter indicate that the ETF/ETP industry is off to a much faster start this year, since the quarter is historically slow in terms of net new assets," said Deborah Fuhr, Global Head of ETF Research and Implementation Strategy at BlackRock.

"In 2011‘s first quarter, global investment markets were shaken by a range of extraordinary events – from social and political unrest throughout the Middle East and northern Africa, to unpredictable weather, and the still unresolved nuclear event in Japan following a catastrophic earthquake and tsunami," said Fuhr. "In this period, USD41.4bn of net new assets flowed into a broad spectrum of ETF products as investors responded to these events and were able to implement appropriate, highly focused investment strategies in a timely fashion."

ETFs are index based open-ended funds that can be bought and sold like ordinary shares on a stock exchange. They have become popular and widely used investment vehicles to facilitate many investment and diversification strategies — from short-term tactical applications to longer-term strategic applications. The ETP industry includes other product structures such as grantor trusts, partnerships, commodity pools and notes.

"Industry asset flows in the first quarter illustrate yet again that ETF and ETP product trends have come to represent sound 'proxies' for investor views and sentiments across the full range of asset classes and global markets," Fuhr observed. "ETFs offer immediate exposure to a large array of indices with the flexibility to be traded at any time with multiple brokers when markets are open. The products offer a menu of cost-effective, transparent products that deliver diversified market exposure – attributes that were highly valued during 2011‘s tumultuous first quarter."

Products tracking broad emerging markets and China showed net outflows at the beginning of the quarter and net inflows for March. At the same time, single country products such as those tracking Brazil, Russia, South Korea and Taiwan attracted net inflows over the quarter. "First quarter activity indicates investors find the ability to adjust exposures easily and quickly an appealing benefit of ETFs," Fuhr said.

During the first quarter, concerns about inflation were another factor driving investment in ETFs, Fuhr said. "Inflation worries generated considerable interest in products providing exposure to indices covering broad commodities, high dividend paying stocks, high yield fixed income, gold and real estate," she noted.

Net inflows went into products providing exposure to energy commodities, illustrating investor interest in participating in expected price increases sparked by unrest in the Middle East and North Africa. Such interest is expected to moderate as regional turbulence eases and energy prices move back to a more normal level, Fuhr concluded.