ETF Assets Reach Record

Terry Flanagan

Global assets in exchange-traded funds and products reached a record US$2.3 trillion in October after a month of strong inflows according to ETFGI’s Global ETF and ETP industry insights report.

“The expectation that the Federal Reserve will maintain its QE scheme at its current size into 2014 and positive market performance encouraged investors to put net inflows of $32.6bn back into the market through ETFs/ETPs,” said Deborah Fuhr, managing partner at ETFGI in the report.

Last month equity ETFs and ETPs had the the largest net inflows of $34.6bn. The largest net outflows were $2.8bn from commodities followed by fixed income with $227m.

Martin Kremenstein, head of passive asset management for Deutsche Asset & Wealth Management Americas told Markets Media: “We have seen flows into equities ETFs, particularly into US and developed markets, and outflows from commodities ETFs, partly due to the gold sell-off.”

Between January and October net inflows were $202.2bn, the same as last year, but total assets this have grown by 19% due to rising markets according to ETFGI.

In the year-to-date equities had the largest net inflows of $193.9bn, 72% more year-on-year. Fixed income had inflows of $21.4bn, less than half of the $56.2bn in the first ten months of last year. Meanwhile commodities had outflows of $33bn, a reversal of net inflows of $20.1bn at this point in 2012 according to the report.

So far this year North America had the largest net inflows of $117.7bn, followed by developed Asia Pacific with $32.8bn and developed Europe with $20.7bn. In contrast, emerging market equities had net outflows of $6.3bn.

In emerging markets last week, Deutsche Asset & Wealth Management launched db X-trackers Harvest CSI 300 China A-Shares Fund (ASHR). The exchange-traded fund listed on the New York Stock Exchange allows investors to directly invest in domestic Chinese companies for the first time.

The ASHR ETF has $105m of assets according to its website, making it the largest ETF launch since 2007 said Kremenstein. “We have had good investor interest with more than 100,000 shares traded since listing,” he added.

Other ETFs access China A-shares through derivatives or other instruments. To launch ASHR, Deutsche worked with Harvest Global Investments Limited, a subsidiary of the bank’s asset management joint venture in China for approximately a year.

A-shares are equities issued by companies incorporated in mainland China, and demoninated and traded in renminbi. The Chinese government limits direct investments in A-shares from foreign investors who have to be approved by regulators. Harvest Global Investments Limited is approved as a Renminbi Qualified Foreign Institutional Investor allowing it to obtain a RQFII quota for the ETF. ASHR tracks the 300 largest and most liquid securities on the Shanghai and Shenzhen Stock Exchanges.

“Gaining access to Chinese companies who are focused on domestic growth is a benefit to investors,” said Kremenstein.

Deutsche Asset & Wealth Management’s US exchange-traded products platform launched in 2006 and had $12bn in assets under management according to the firm, with $66bn globally, at the end of September.

So far this year Vanguard has the largest net ETF inflows of $51.6bn, followed by iShares with $51.3bn and WisdomTree in third with 12.8bn according to the ETFGI report.

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