The popularity of ETF investing has been rising since its inception more than 25 years ago. Total ETF assets have been increasing at a “fairly consistent” annual rate of 25% from the $770 billion seen 10 years ago, Bank of America noted in December 2019.
The market could reach a blockbuster $50 trillion by 2030, the bank forecast. Overall, assets of global exchange traded funds (ETFs) reached $7.736 trillion at the end of 2020, per data from Statista.
Meanwhile, the pandemic-ridden 2020 witnessed record ETF assets growth. A staggering $507.4 billion flowed into U.S.-listed ETFs during the year, surpassing the previous record of $476.1 billion from 2017. Annual inflows for 2020 were also 55% higher than the $326.3 billion recorded in 2019, per etf.com.
Against this backdrop, let’s take a look what’s brewing in the ETF industry this year and which ETFs are investors’ favorites.
Industry Biggies Continue to Win
Many funds are small in size despite having a lucrative methodology. These funds remain unprofitable after being in the marketplace for a year or two and eventually shut down.
The problem, probably, is lack of innovative and fresh ideas given the maturity of the industry. “Prior to 2008, new funds had an easier time getting off the ground,” Wall Street Journal pointed out. However, it is now too tough to enjoy a first-mover advantage as almost every theme, every asset class, every factor, every country has an ETF for itself.
Small issuers are facing this problem particularly because there are “too big to fail” issuers like BlackRock Inc. (BLK), Vanguard Group and State Street Corp. (STT), that dominate the major share of all ETF assets.
These behemoths also offer extremely low-cost products. Most recently, BlackRock slashed fees on $7.6 Billion style ETFs to near-zero. No wonder, such products have higher chances of gaining assets.
Upbeat Stock Market Kept Interest in Passive ETFs Charged-Up Except ARKK
Investors should note that the upbeat stock market kept the passive funds in a sweet spot in the past year despite the virus outbreak. SPDR S&P 500 ETF Trust SPY has been up 74.6% over the past year. One exception is active ETF ARK Innovation ETF ARKK, which has been a pandemic winner. Focus on high-flying Tesla has also benefited the fund. This fund has been investors' favorite in the recent past (read: Are You a Fan of Ark ETFs' Cathie Wood? Follow This Portfolio).
ETFs That Amassed Most Assets This Year
Against this backdrop, we've highlighted below 10 ETFs that have garnered maximum assets so far this year. Low-cost ETFs gained attention while value ETFs and value sectors like financials and energy managed a place in the top list (the data are as per etf.com).
Vanguard S&P 500 ETF (VOO) – $16.06 billion; Expense Ratio (ER): 0.03%
iShares Core S&P 500 ETF (IVV) – $8.37 billion; ER: 0.03%
Vanguard Total Stock Market ETF VTI – $8.17 billion; ER: 0.03%
Financial Select Sector SPDR Fund XLF – $8.03 billion; ER: 0.12%
iShares Core MSCI Emerging Markets ETF IEMG – $7.16 billion; 0.11%
ARK Innovation ETF ARKK – $7.08 billion; 0.75%
iShares Core Total USD Bond Market ETF IUSB – $5.72 billion; 0.06%
Vanguard Total Bond Market ETF BND – $5.28 billion; 0.04%
Energy Select Sector SPDR Fund XLE – $4.07 billion; 0.12%
Vanguard Value ETF VTV – $4.04 billion; 0.04%
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Financial Select Sector SPDR ETF (XLF): ETF Research Reports
SPDR S&P 500 ETF (SPY): ETF Research Reports
Vanguard Total Stock Market ETF (VTI): ETF Research Reports
iShares Core S&P 500 ETF (IVV): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
