Growth in ETF assets continues to be exponential, helped by an ever-extended equity bull market. Since ETF assets reached the critical threshold of $1trn in 2009, it took them until 2013 to add another trillion dollars, according to Blackrock data. The $3trn mark was reached in 2016, and it took investors only a year to add another trillion to the tally.
US equities still account for more than half of total assets in ETFs, but recent growth has been driven by other asset classes. Year-to-date, investment-grade corporate bonds (+$23.9bn), European equities (+$22.9bn) and emerging market equities (+$19.9bn) saw the largest net inflows.
Though US equities have fallen out of favour with ETF investors, seeing $3.1bn of net outflows in May, American investors continued to account for the bulk of passive net inflows.
The $11bn of net inflows into ETFs by European investors was the “third-largest single month of net inflows ever”, according to Blackrock. European equities were once again the most popular asset class, with $3bn of inflows, profiting from market buoyancy following Emmanuel Macron’s convincing win in the French presidential elections.
American investors doubled up on European equity ETFs, committing an additional $5.bn in May. Interestingly, these flows went almost exclusively into unhedged funds, suggesting US investors believe the dollar has little potential to appreciate from here.
US investors put their money on unhedged European equity ETFs
EM equities and debt, as well as investment grade corporate bond ETFs, also all saw net inflows in excess of $1bn.