US ETF Market Tops USD1 Trillion
Tuesday, January 18, 2011

New data has revealed that total assets held in exchange-traded funds in the US surpassed USD1 trillion for the first time during 2010.

According to a report by Biryinyi Associates, USD111.4bn in net new money flowed into ETFs last year, taking their combined market value to more than USD1 trillion, 30% higher than at the end of 2009. Emerging market funds were the most popular, taking in USD32.2bn during 2010. Bond funds were the second-most popular flavour, taking in USD23.7bn while US-focused ETFs where the third-most popular, taking in USD13.9bn.

An ETF is an investment company with shares which trade intraday on stock exchanges at market-determined prices. Investors can buy and sell them in the same way as they currently trade in equities on an exchange. First listed in the US in 1993, and in Europe in 2000, it is believed that there are now around 2,000 ETFs being traded globally.

Research by the National Stock Exchange (NSX) also suggested that assets under management in EFTs had surpassed USD1 trillion last year. According to NSX, December 2010 net cash flows totaled USD19bn and 2010 net cash inflows totaled approximately USD119bn, marking the fourth consecutive year of net cash flows in excess of USD100bn.

At the end of December 2010, the number of listed products totaled 1,099, nearly a five-fold increase compared to December 2005 when the number of listed products totaled 221, NSX said.

NSX's report shows that 145 US listed products have surpassed USD1bn in AUM and over 500 have surpassed USD100m in AUM. ETF/ETN (Exchange Traded Notes) Share Volume averaged 1.46bn shares per day. ETF/ETN Notional Trading Volume totaled USD18.2 trillion, representing 29% of all US equity trading volume.

Recent figures from iShares, the largest ETF provider by market share at 40%, suggest that European ETF assets have also grown substantially in the past year, with the firm's European business surpassing USD100bn in assets under management last year.

“Surpassing USD100bn in European assets under management is an important milestone for the business. It underpins our depth and breadth of expertise in the ETF market and showcases our transparent, innovative and liquid ETF product range available to investors throughout Europe," commented David Gardner, Head of Sales for iShares EMEA.

“We believe of paramount importance to ETF investors in 2011 will be two key issues including (i) does the ETF product have consistent levels of liquidity in all economic conditions and (ii) does the ETF investor understand what they own in terms of structure and index exposure. Importantly, serious money requires serious solutions, knowing what you own is absolutely essential," he added.

The company said that its fixed income product range surpassed USD25bn in assets under management in August last year, and the world’s first European high yield bond ETF, launched by iShares last September, has already surpassed USD400m in assets under management.

Gardner said that iShares has "ambitious plans" to build out its presence and product set throughout Europe in the months ahead.