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2021 Is a Huge Year for ETF Investing

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What You Need to Know

  • ETFGI reports that $476 billion flowed into U.S. ETFs during the first six months of the year.
  • By the end of the first half of 2021 assets in U.S. ETFs had climbed 19% from the end of 2020 to $6.37 trillion.
  • Vanguard dominated first-half asset flows.

ETF assets and inflows exploded during the first half of 2021.

According to ETFGI, a research and consulting firm, a record $476 billion flowed into U.S. ETFs during the first six months of the year, including $73 billion in June alone. Equity ETFs accounted for 69% of the asset flow followed by fixed Income funds, at 18% of the flows.

All categories of funds — ETFGI has nine — gained assets during the first half of the year except leveraged ETFs, which lost $1.51 billion in assets. June 2021 marked the 23rd consecutive month of net inflows.

By the end of the first half of 2021, assets in U.S. ETFs had climbed 19% from the end of 2020 to $6.37 trillion. Equity ETFs accounted for 78% of total assets; fixed income ETFs were 17% of total assets.

Invesco’s QQQ Trust (QQQ), which invests in the 100 largest companies listed on the Nasdaq, led all other ETFs for net asset growth in June, gaining $6.16 billion, followed by State Street’s SPDR S&P 500 ETF, the first ETF to list in the U.S., which attracted $4.88 billion.

Vanguard’s Top Spot

But Vanguard led other asset managers for asset flows in the first half of the year. Eight Vanguard ETFs, led by its S&P 500 ETF (VOO), collected a total $89.89 billion in assets, accounting for close to 20% of the $476 billion net inflows in ETFs during the first half of the year.

BlackRock’s iShares followed with $33.17 billion, led by its iShares S&P 500 ETF, which collected $12.75 billion during the first half. State Street’s SPY ETF, in contrast, had net outflows of $1.99 billion in the first half of the year, and iShares 20+ Year Treasury Bond ETF (TLT) experienced $20.36 billion in outflows.

Among the exchange-traded products that ETFGI tracks — which include commodity pools and exchange-traded notes but not ETFs — the iShares Gold Trust (IAU) and SPDR Gold Shares (GLD) were among the top three funds attracting new net assets in June, but both saw large outflows during the first half of the year — $6.86 billion for GLD and $1.04 billion for IAU.

The outflows and inflows in gold ETFs most likely reflects the changing view of investors’ inflation expectations. Gold is traditionally considered a hedge against rising inflation, which was not a concern during the first half of the year when the global economy was suffering from pandemic-induced shutdowns but has become a worry during the strong economic rebound.