BlackRock’s ETF asset surge leads record industry rally

The ETF industry’s global assets soared to an all-time high of more than $9trn at the end of May, with BlackRock’s [BLK] ETF business seeing the most significant increase in the number of assets it is managing, according to data from ETFGI.

BlackRock’s share price climbed 7% throughout May and went on to reach a 52-week high of $890 on 7 June. As of 24 June, the stock is up 21.5% in the year to date and 64.6% in the past 12 months.

The firm’s iShares business, which is one of the largest ETF providers in the market, saw assets break through a $3trn milestone at the end of May, data from ETFGI seen by the Financial Times shows.

  

Its closest rival State Street [STT] also manages more than $3trn, while Vanguard oversees close to $2trn, according to Deborah Fuhr, the founder and managing partner of ETFGI. In comparison, its next competitor, Invesco [IVZ], manages less than $500m.

“The top three capture a lot of the assets,” she told Opto, adding that the demand and interest in the space has been driven primarily by environment, social and governance [ESG] products. In fact, BlackRock’s US Carbon Transition Readiness ESG ETF [LCTU] listing back in April was at the time the largest ETF debut in the market. Investors poured $1.25bn into the fund on its first day of trading, Seeking Alpha noted.

 

Global ETF assets on track to outpace 2020

According to data by ETFGI, net flows into global ETFs and exchange-traded products (ETPs) during the first five months of the year reached $559.5bn — significantly higher than the prior record of $229.3bn that the industry had at this point last year.

Equity products have attracted the majority of net flows, with global market cap equities seeing $280bn of net new money in the year to May, which puts it on track to eclipse last year’s full-year total of $306bn.

“On a year-over-year basis, I think we won’t see as much money going into fixed income this year as last because we’ve seen people have a risk on view [by] going into riskier assets like equities,” Fuhr states. 

“On a year-over-year basis, I think we won’t see as much money going into fixed income this year as last because we’ve seen people have a risk on view [by] going into riskier assets like equities” - Deborah Fuhr

 

She also noted that investment products like smart beta have become popular again, with net inflows during the first five months of the year hitting $93bn — at this point last year, it had been only $13bn.

Thematic-focused ETFs have also been very popular, with investors “looking for the mega trends that they should be looking at and investing in for the future”. These types of funds took in $51bn during the first five months of the year, according to ETFGI’s Fuhr. In comparison, thematic ETFs saw inflows of $46bn during the same period in 2020 and $105bn for the full year.

At the ETF provider level, BlackRock’s funds saw some of the biggest inflows in May. The iShares Core MSCI EAFE ETF [IEFA], iShares Global Financials ETF [IXG], iShares Commodities Dynamic Roll Strategy ETF [COMT], iShares Core Total USD Bond Market ETF [IUSB] and iShares TIPS Bond ETF [TIP] were all among the top 20 ETFs during the month. 

Out of the five funds, the iShares Commodities Dynamic Roll Strategy ETF had the best year-to-date (through 24 June) performance, with a gain of 27.6%. Meanwhile, the iShares Core Total USD Bond Market ETF was the worst-performing, falling by 1.5% in the same period.

 

Expanding market participants

For ETFGI’s Fuhr, the phenomenal growth is being driven by an increase in awareness from all types of investors, particularly those who started to invest as a hobby during the lockdowns of last year. 

“[What’s] most unique about ETFs is it’s really the only democratic investment product. What I mean by that is whether you’re a hedge fund or a pension fund or a retail investor you get access to the exact same product at the same annual cost with a very small minimal investment size.”

“[What’s] most unique about ETFs is it’s really the only democratic investment product. What I mean by that is whether you’re a hedge fund or a pension fund or a retail investor you get access to the exact same product at the same annual cost with a very small minimal investment size” - Deborah Fuhr

 

“[ETFs] continue to be offered in more markets as well. ETFs are listed in 68 different countries around the world. From modest beginnings, 31 years ago, in Canada, ETFs have really grown to expand the world.”

With such a broadening market base, Salim Ramji, global head of iShares and index investments at BlackRock, told the Financial Times that the industry has decades’ worth of growth ahead of it. The firm forecasts the industry’s assets to hit $15trn by the end of 2025, the publication noted.