Daily ETF Watch: $2T Asset Threshold Near

The 22-year-old ETF industry is on the verge of an astonishing $2 trillion in assets under management.

Olly
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Managing Editor
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Reviewed by: Olly Ludwig
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Edited by: Olly Ludwig

The 22-year-old ETF industry is on the verge of an astonishing $2 trillion in assets under management.

Total assets in U.S.-listed ETFs are fast approaching $2 trillion, a milestone that will make increasingly clear that the exchange-traded fund is well on its way to earning a place on center stage of 21st-century investment markets.

Total assets in more than 1,660 ETFs are now just shy of $1.981 trillion—just $19 billion short of the $2 trillion threshold. Assets keep flowing into ETFs, fund launches continue apace and markets keep pushing upward into record territory almost six years after the subprime mortgage crisis cratered markets and brought the global economy to the brink of a full-scale meltdown.

Investors have become more discerning since the financial crisis, and relatively cheap, transparent and tax-efficient ETFs loom large amid growing awareness that actively managed mutual funds and hedge funds aren’t all they’re cracked up to be in terms of performance, and are definitely quite a bit more expensive than ETFs.

To appreciate the accelerating adoption of ETFs, consider that it took almost 18 years for ETFs to reach $1 trillion in assets, and about four more years to double to $2 trillion.

For further perspective, the nearly $2 trillion in ETF assets under management in the U.S. compares with about $3 trillion in hedge fund assets and about $15 trillion in open-end mutual fund assets, according to a variety of industry data sources.

At the end of October, 85 percent of all U.S.-listed ETF assets were controlled by the four-biggest ETF sponsors, and the 10 biggest individual ETFs made up almost 30 percent of all ETF assets, according to data compiled by ETF.com.

A Robust Pace Of Launches

But the pace of new launches is currently accelerating amid continuing signs that more and more players in the money management industry want to get a piece of the action in the 22-year-old industry.

So far in 2014, 183 new ETFs have been launched, compared with 162 launches in all of 2013, according to data compiled by ETF.com. The pace of closures meanwhile looks similar, with 60 strategies shuttered so far this year compared with 69 closures last year.

The first U.S.-listed ETF, the SPDR S&P 500 ETF (SPY | A-98), remains the single biggest exchange-traded fund in the world, with just under $200 billion in assets as of last week, or about 10 percent all the $1.981 trillion now invested in U.S.-listed ETFs.

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Olly Ludwig is the former managing editor of etf.com. Previously, he was a financial advisor at Morgan Stanley Smith Barney and an editor at Bloomberg News. Before that, Ludwig was a journalist at the Reuters News Agency in New York.