December inflows of US$52 billion tipped the global exchange-traded product (ETP) market into record territory last year with investors increasingly adopting more diversified and opportunistic strategies, the latest BlackRock on the sector shows.
According to the December 2015 BlackRock ‘Global ETP Landscape’ report, annual flows hit more than US$350 billion over the calendar year – an increase of US$20 billion compared to the previous peak in 2014.
“The unprecedented results came despite more moderate flows for US equities, which make up just under half of all assets,” the BlackRock report says. “2015 highlighted not only the long term growth trajectory for global ETPs, but also the diversification by geographic exposure and the ability to adapt quickly to shifting market sentiment.”
The report says US equity ETP flows of US$72.5 billion were down significantly on last year with outflows from one product a major factor.
“Results would have exceeded $100bn were it not for the largest fund in the category experiencing heavy outflows, the majority of which came at the hands of non-US investors during the first half of the year,” the BlackRock study says.
Despite the outflows, the US$160 billion State Street SPDR S&P 500 exchange-traded fund (ETF) dwarfs its nearest rival, the US$65 billion BlackRock-owned iShares Core S&P 500 ETF.
However, State Street was the only major ETF provider to go backwards over 2015, seeing assets under management shrink by US$38.6 billion (including almost US$20 billion of outflows) and its market share slump by 2.6 per cent.
Outside of the US, about 80 per cent of ETP flows into other developed markets were centred on Europe, Japan and EAFE (Europe, Australasia and the Far East) indices.
Flows into ex-US developed equity market ETPs topped US$200 billion for the year, almost double the previous year.
“Fixed income flows of $93.5bn represented 22% organic growth and eclipsed the record set in 2014, despite concerns over the impact of the Fed interest rate increase that finally materialized in December. Fixed income accounted for 27% of global ETP flows this year,” the BlackRock report says.
Emerging markets ETPs battled through another tough year with equity products experiencing outflows of US$26 billion. The Latin American ETP market, particularly Mexico, continued its downward slide in 2015, shedding US$1.1 billion in outflows. Since the 2012 peak of US$12.2 billion, the Latin American ETP market has dwindled to just US$5.1 billion as at December 2015.
Total global assets sat at just under US$3 trillion spread across 5,449 ETPs, representing an increase of almost 400 products during the 12-month period, the BlackRock study says.
– David Chaplin, Investment News NZ