The news about exchange-traded funds has been almost uniformly positive in 2013. Notwithstanding a slowdown in investor adoption of ETFs in Asia, as LifeHealthPro reported in September, demand for the vehicles has mostly been on the upswing.
One indicator of the market’s expansion is the rollout of passively managed ETFs, an outgrowth of rising investor demand for alternative vehicles that can help optimize the risk-adjusted performance of portfolios. More than eight in 10 sponsors of the products (86 percent) say they’re now developing passive ETFs.
If the latest research is any guide, those sponsors should find ready and willing buyers of ETFs — passive or otherwise. A new report from Cerulli Associates, “The Cerulli Edge: U.S. Monthly Product Trends,” reveals that ETF assets grew to $1.6 trillion from $1.5 trillion in October, representing a 4.8 percent increase, while attracting an additional $24.8 billion in net flows for the month.
Mutual fund assets in October also grew, rising to $10.7 trillion from $10.4 trillion, a 2 percent gain. Net new flows of mutual funds over the same period hit $18.3 billion, up substantially from $2.7 billion in September.
“Strong asset growth for mutual funds (2 percent) and ETFs (4.8 percent) were bolstered by a positive month of flows for both vehicles,” the report states. “In particular, flows helped ETFs this year, as the vehicle witnessed organic growth of 11 percent October [year-to-date].”
Passively managed mutual funds and ETFs enjoyed the most significant growth during the month, the survey adds. Assets under management for both vehicles increased to $3.3 trillion in October, up from $3.2 trillion in September, a 3.2 percent rise.
Actively managed mutual funds and ETFs also increased to $8.8 trillion in assets under management in October, up from $8.7 trillion in September, a 2.1 percent rise.
Cerulli reports also that U.S. equities accounted for the largest share (41 percent or $4.4 trillion) of mutual funds by asset by class in October. Other asset classes had significantly smaller shares of the mutual fund pie, including taxable bonds (24 percent or $2.5 trillion), international equities (16 percent or $1.7 trillion), allocation (10 percent or $1 trillion), municipal bonds (5 percent or $519.3 billion), sector equities (3 percent or $343.5 billion) and alternatives (one percent or $126.4 billion).