07.18.2017
By John D'Antona

ETFs Roar Ahead

And they’re off! Big time.

ETF inflows that is, according to State Street Global Advisors, which reported that through the first six months of 2017, US-listed ETFs have amassed over $245 billion of inflows –  the best start to a year in the ETF industry’s 24 years.

Matthew Bartolini, Head of SPDR Americas Research at SSGA said that after a record-setting 2016, fixed income and equity ETFs have showed no signs of slowing down. Through the first six months of 2017, he reported that fixed income ETF inflows have topped $70 billion and equity inflows are even more impressive.

“Equity ETFs have played a key part in sending ETF assets to all-time highs and new records with $172 billion of inflows

Matthew Bartolini, SSGA

in the first half of the year,” Bartolini said. “The one quarter of a trillion dollars deposited into ETFs this year equates to almost 10 percent of the assets under management at the start of the year. The previous highest percentage gain occurred in 2012, when ETFs took in 7 percent of start of year assets through the first six months of the year.”

Within equities on the sector level, investors have favored Technology, Financials and Healthcare ETFs, which attracted $5.3 billion, $3.8 billion and $3.2 billion respectively year to date.

Bartolini added that equities overall have seen $172 billion in inflows this year or 50% of last year’s entire take. This is a staggering feat, he said, considering that at this juncture in 2016, equity inflows were actually negative.

In looking at fixed income ETFs, Bartolini noted that bond fund inflows also show no sign of slowing down.

“Through the first six months of the year, with fixed income flows at the $70 billion inflows mark so far, they are on a pace to shatter all records as if they were Mike Tyson in the late Eighties,” he said.

Fixed income ETF demand, he continued, was rooted in several factors; inertia for the asset class already in place, low cost and efficient beta exposure in a low rate environment, as well as protection from potential equity drawdowns or geopolitical risks.

Also, investors deposited over $20 billion into international ETFs in June and over $80 billion through the first six months of the year—marking the best start to a year ever for international funds.

“The sift overseas was broad based, as emerging market fund flows topped $10 billion for the second quarter in a row, and are off to their best first half gain ever,” Bartolini said.  “Even currency hedged ETFs, a segment which has somewhat been under pressure as the dollar has shrunk 6.44 percent this year, were able to get in on the action with almost $2 billion in inflows year to date.”

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