2016: Year Of ETF Investors Acting Rationally

January 10, 2017

Here are the significant (over $1 billion) flows for exchange-specific funds in 2016:

These losses overshadowed the successes of other idiosyncratic strategies, especially ESG. Environmental, social or governance-oriented strategies gathered significant assets in 2016, with net inflows to 17 of the 21 such funds. The leader, the SPDR SSGA Gender Diversity Index ETF (SHE) gathered over $250 million in assets since its International Women’s Day launch in March 2016, making it the fourth-most-successful launch of the year. But SHE was hardly alone. Half of all ESG funds listed today launched in 2016.

What Will 2017 Bring?

If 2016 is any guide, 2017 will see more steely-eyed rationality from ETF investors. In most asset classes, this means a relentless push for cheaper market access, and a show-me attitude toward complexity and tactical approaches. 

In fixed income, active management may continue to accelerate. Outside of fixed income, active could well face ongoing skepticism.

And those idiosyncratic restricted universe funds? The latest launches in that space came over 18 months ago, in June 2015—two geared biotech funds that happen to offer pretty vanillalike exposure to the industry. Outflows from the idiosyncratic restricted universe fund and zero launches in 2016 say it all.

At the time of writing, the author held none of the securities mentioned. Elisabeth Kashner is the director of ETF research and analytics for FactSet.

 

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