Looking at ETF market growth through the lens of ETF issuers always tells an interesting tale. In 2020, the story was the wide dispersion in asset gathering across 140-plus ETF issuers, showing that success in this industry can be compounding or confounding in any given year.
The broad overarching story line is one of success—much like most years in recent memory.
The ETF market grew at its usual 23%-or-so clip, breaking through $5 trillion in total assets in the U.S. for the first time, and closing the year with $5.44 trillion after more than $507 billion in fresh assets found its way into ETFs last year. 2020 was a record asset-gathering year.
Net Asset Flows By Asset Class (2020):
|Net Flows ($, mm)||AUM ($, mm)||% of AUM|
|U.S. Fixed Income||186,387.38||968,811.08||19.24%|
|International Fixed Income||25,515.58||123,724.66||20.62%|
Sizing Up The Big 3
First, it was another—usually—good year for the biggest ETF issuers, but it was particularly good for two of them: BlackRock and Vanguard.
BlackRock crossed a major milestone in 2020 when total ETF assets under management (branded as iShares) crossed above $2 trillion. That’s huge. One issuer alone has more than $2 trillion of the $5.44 trillion in U.S.-listed ETF assets.
BlackRock, which took in $127 billion in net new assets last year, commands about 37% of the entire U.S. ETF market in terms of assets, and remains the uncontested No. 1 ETF issuer in the world.
That said, BlackRock’s asset growth in percentage terms underwhelmed relative to 2019. Last year, the firm’s total pie grew about 17.5% (when flows and performance are taken into account), which means BlackRock’s footprint grew at a slower pace than the broader industry, unlike in 2019.
Vanguard, on the other hand, took in the biggest asset haul in nominal terms last year, picking up almost $200 billion in new assets. The Vanguard Total Stock Market ETF (VTI) and the Vanguard S&P 500 ETF (VOO) were the two most popular funds of 2020, seeing net creations of $32.2 billion and $21.5 billion, respectively.
Low-cost beta is in great demand, and in this, 2020 was a record year for Vanguard, which saw its total assets under management hit $1.5 trillion, up more than 31% on the year.
State Street Global Advisors, the third largest ETF issuer, lagged the pack, picking up only $37.4 billion in net inflows in 2020, growing about 17%—roughly at the same pace as BlackRock but with an increasingly smaller footprint.
Together, the three market leaders now control about 80% of total U.S. ETF market share. That’s a big bite, but it’s a bite that has actually gotten smaller in the past year. Going back to 2012, the top three issuers have commanded between 81% and 83% most years, and in early 2019, that share hit 92% for a time. It’s now at 80%.
In 2020, smaller issuers managed to slightly chip away at the Big 3 more so than in any other year.
ARK: The Story Of The Year
ARK Invest saw off-the-charts growth in 2020. The small, active shop hit mainstream in a major way last year, and it’s small no more.
Boasting net inflows of more than $20 billion in the year and fund performance that often registered in the triple digits, ARK now commands some $35 billion in total assets. That’s roughly 1,000% growth in one year, from $3.2 billion at the start of 2020.
2020 will go down as the year when Ark Invest founder Cathie Wood and her team could do no wrong. The firm’s largest ETF, the ARK Innovation ETF (ARKK) ballooned to $18 billion, picking up followers throughout the market’s many turns last year, all while delivering 152% in gains in 12 months. Compare that to the 18% returns the SPDR S&P 500 ETF Trust (SPY) delivered in the same time frame.
And after some short-lived drama with partner Resolute, which threatened to take control of the firm in early 2021, it seems both parties came to terms, and Wood will continue to helm the company.
ARK helped propel the case for active management in equity ETFs in a way no other firm had done before, all tied to the disruption-in-every-industry theme.
Theme Investing Resonating
Something about a global pandemic and the massive disruption it triggered across all sectors made theme investing compelling in a new way investors could relate to. From work from home themes, to e-everything, funds that offered cross-sector access to timely themes soared in demand and performance.
ARK benefited from that trend. So did, in a way, Invesco, with the massive popularity of the Invesco QQQ Trust (QQQ), which picked up almost $18 billion in a year as people sought tech thematic plays. The firm’s late-year decision to grow its QQQ lineup by launching the siblings Invesco NASDAQ Next Gen 100 ETF (QQQJ) and the Invesco NASDAQ 100 ETF (QQQM) was also met with fanfare. These two funds already command a combined $900 million, and Invesco tallied overall ETF asset growth of more than 30% for the year.
Global X Funds, well-known for its focus on thematic ETFs, was a standout winner in theme investing. The firm now commands almost $21 billion in total assets, up more than 60% in 12 months—the second strongest growth rate of any issuer in 2020.
Funds like the Global X Cloud Computing ETF (CLOU), Global X Video Games & Esports ETF (HERO), Global X Robotics & Artificial Intelligence ETF (BOTZ), Global X Lithium & Battery Tech ETF (LIT) and Global X Telemedicine & Digital Health ETF (EDOC) were some of the tickers to capture people’s imagination in 2020.
Direxion, once known for its leveraged and inverse ETFs, was another issuer to ride that wave with its new focus on thematic plays. The firm’s recently launched Direxion Work From Home ETF (WFH) was one of the most talked about tickers last year for timing when it came to market access tailored for current times.
Other thematic success came with funds like the Direxion NASDAQ-100 Equal Weighted Index Shares (QQQE), as appetite for tech-focused growth funds surpassed most other segments.
Direxion’s total ETF assets grew 32% in a year. Again, for perspective, the broader ETF market grew 23%.
There Were Losers Too
While double-digit asset growth was seen across various ETF issuers, there were several that struggled last year.
WisdomTree, for example, had a disappointing year. Again. The firm dropped another two spots, to No. 10, in the ranking of largest ETF issuers, after growing below-industry pace for the past few years.
WisdomTree saw its asset base shrink to $38.35 billion tied primarily to net outflows of nearly $1.5 billion in the past 12 months. What’s unique about WisdomTree is that the firm is the sole publicly traded ETF-only company. Its recent struggle to grow reminds us that the ETF industry may be booming, but it’s clearly not that simple to succeed as an ETF issuer.
There were more than 30 issuers who gave up ground in 2020. Vident and FlexShares, Northern Trust’s brand of ETFs, are among them, each facing asset contraction of anywhere between 12% and 20% in one year.
Free Tools For You
If you’d like to track ETF issuers and asset trends, we offer free tools on our website for that.
You can check our ETF Fund Flows Tool for specific queries about creations and redemptions, or you can scroll down on that page for our data analytics resources that separate asset flows trends by day, week, month and calendar year, all free to you. The ETF League Tables, which show the latest ranking of ETF issuers, are updated daily.
Contact Cinthia Murphy at [email protected]