Last year was another record breaker for ETF fund flows, according to a report released Thursday by State Street Global Advisors. However, the continuing inflow did not lift all boats, with two of the top 10 ETF providers experiencing outflows.
Total fund flows for the industry hit $284 billion, according to SSGA. This is up $39 billion, or 16%, from the record high set in 2015.
“The significant increase in assets has continued to shift the dynamic of the investment industry,” said researchers David B. Mazza and Matthew Bartolini of SSGA Funds, with the total share of ETF assets now accounting for 20% of fund assets “up from 13% only five short years ago.”
This record-breaking year, they add, saw a large increase in fixed income ETF flows. Investors put some $90 billion into these assets in 2016, nearly doubling the $58 billion that went into them in 2015.
“This surge in assets came in spite of continued economic and geopolitical uncertainty, and defied the spike in rates as the U.S. 10-year yield jumped from 1.3% to 2.5% over the last two quarters,” explained Mazza and Bartolini in the report.
As for equities, they came close but could not top the record yearly flows of $196 billion set in 2013, experiencing about $180.9 billion in flows in 2016. Meanwhile, commodity-based funds posted their highest yearly flows — $10.8 billion — since 2010, “as gold ended a three-year losing streak and reflationary spirits were rekindled by the potential policies of the president-elect.”
While ETFs notched a banner year, the three largest issuers benefited handsomely. BlackRock added $106.3 billion in ETF assets, Vanguard’s flows hit $94.7 billion, and State Street brought in $52.6 billion.
Schwab came in behind the “big three” with $16.1 billion in ETF flows. VanEck’s inflows were nearly $8 billion, while PowerShares’ inflows topped $7.8 billion.
There were two fund firms, however, who saw outflows: WisdomTree saw more than $12.5 billion in ETF outflows, and First Trust’s outflows hit $2.9 billion.
SSGA researchers say that if President-elect Donald Trump can deliver on his promises to lower taxes, decrease regulation and boost spending, the “Trump jump” in equities may continue.
On the other hand, a derailment or delay of these policies could hurt investor sentiment.
“We are standing at the crossroads as the calendar flips to 2017, and the direction of travel remains largely unknown,” Mazza and Bartolini explained.
“As basic as it may be,” they said, “diversification may be the ideal navigational guidepost if the market decides to course correct (to the north or south) with a portion of the asset allocation carved out for both risk mitigation and tactical positioning towards any ‘Trump Trends.’ ”
--- Check out Schwab ETF OneSource Assets Grew by 34% in 2016 on ThinkAdvisor.