The exchange-traded fund market may be capturing the attention of investors because of its fast-paced growth in assets and number of funds, but that headline fails to reveal some key developments in the market over the past five years.
According to a recent CFRA report by Todd Rosenbluth, director of ETF and mutual fund research, and Aniket Ullal, head of fund data and analytics, just 100 ETFs accounted for 83% of cumulative asset growth from year-end 2014 through August 2019. Twenty ETFs accounted for 44% of asset growth.
BlackRock and Vanguard dominated, sponsoring 69 of the 100 fastest growing ETFs, and 16 of the 20 fastest growing funds, illustrating what CFRA calls a “winner takes most” concentration effect and the allure of low-cost core index funds.
As of the end of August, U.S. ETF assets totaled $3.94 trillion, having increased more than $254 billion, or almost 7% over the previous 12 months, according to the Investment Company Institute. Assets of U.S. mutual funds rose $445 billion, or 2.2% to $19.93 trillion, five times the total assets of ETFs.
The total number of mutual funds as of the end of August was 8,009, almost four times the number of ETFs, at 2,053, according to ICI, but their net asset flows, representing investor demand, are much smaller.
Year to date through Aug. 31, net asset flows into mutual funds were $59.6 billion, less than one-third the $202.1 billion of flows into ETFs, according to Morningstar data.
Asset Growth and Shrinkage Among ETFs
The CFRA report focused on 1,662 ETFs listed in the U.S. as of year-end 2014 following their progress — and demise — through August 2019. Over that time, cumulative assets grew by 90%.
Four-hundred twenty-three ETFs, or 25%, saw assets grow more than 20%; 112 funds, or 7%, experienced asset declines; and 399 funds, or 23%, closed.
Vanguard was the only fund company that had no ETF closures, and 98% of its ETFs grew assets, a higher percentage than any other fund company, but the number of its funds in the study, at 67, was far less than the number at BlackRock, Invesco and State Street. They all had well over 100 ETFs at the end of 2014 and in the case of BlackRock almost 300 funds.