Another Record-Setting Year for ETFs?

Research firm Strategic Insight (SI), owned by PLANADVISER’s parent company, Asset International, Inc., has estimated that U.S. exchange-traded funds (ETFs) drew net inflows of $110 billion in the full year 2009.  

While SI noted that figure (which includes exchange-traded notes, or ETNs) is short of the record inflows of $176 billion that ETFs enjoyed in 2008, that level “will likely bring U.S. ETF assets past $750 billion at year-end, setting a record for ETF asset totals.”  SI noted that, worldwide, ETF assets now exceed $1 trillion.  

In a press release, SI said that, much like traditional mutual funds (see “Bond Mutual Funds On Track for Record Inflows in 2009”), ETF flows during 2009 were driven mostly by taxable bond ETFs and international equity ETFs, which together accounted for roughly 70% of all ETF net inflows. 

Trillion Mark?

“Coming after the surge in ETF growth in 2008, this year’s continuing momentum for ETFs marks a maturing of the space. The diversity of the ETF marketplace allows for growth when markets decline as well as when they rebound,” said Loren Fox, SI senior research analyst. “Given what we’ve seen, it’s possible that U.S. ETF assets will hit the $1 trillion mark in 2010 or 2011.”  

Across all industry segments, including ETFs, stock and bond fund assets increased by more than $2 trillion in 2009, benefitting from strong net asset value (NAV) appreciation, and from record bond fund inflows.  

Such a yearly increase in managed assets was the largest in the fund industry’s history (the prior record of annual asset gains occurred in 2003 when long-term fund assets increased by $1.36 trillion), according to SI.  

Yet, even with such dramatic rebound in 2009, stock and bond fund asset are still $1.3 trillion below their levels at year-end 2007.