Only seven months into the year, and U.S.-listed ETFs have already attracted roughly $274 billion in net creations.
That number is quickly reaching what currently stands as the industry’s all-time annual inflow record of $287.5 billion, which was notched last year. And we still have five months to go before the year is over.
Broadly speaking, the quickening pace of ETF adoption has been linked primarily to the advisory community, which is increasingly turning to ETFs for their low cost and ease of use in an era marked by lower returns and new regulations, such as the Department of Labor’s fiduciary rule, now in effect.
ETFs, The Go-To Vehicle
Also driving ETF adoption is active managers’ growing use of beta, as well as institutional investors’ demand for ETFs for tactical allocation, risk management and cash equitization purposes. In all, every segment of the investing community seems to be increasingly turning to ETFs, helping fuel the industry as a whole.
In the month of July, investors poured some $24.6 billion in fresh net assets into ETFs, half of which landed into U.S. fixed-income funds. Among the most popular were strategies like the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and the iShares Core U.S. Aggregate Bond ETF (AGG).
New this past month was a return of junk bond funds to the top 10 creations. The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and the SPDR Bloomberg Barclays High Yield Bond ETF (JNK) had been bleeding assets in 2017, with HYG a net loser of $1.7 billion and JNK seeing net outflows of $741 million in the six months between January and June. But in July, these funds gathered a combined $2 billion each in net creations, making them some of the most popular funds last month.
Int’l Equity ETFs Still In High Demand
What hasn’t changed is the ongoing appetite for international equity exposure, which continues unabated this year. Another $10 billion landed into ETFs such as the iShares Core MSCI EAFE ETF (IEFA), the Vanguard FTSE Developed Markets ETF (VEA) and the iShares Core MSCI Emerging Markets ETF (IEMG) in July.
So far in 2017, international equities have attracted more than $103 billion in net assets—the most in-demand asset class this year, as investors look for developed non-U.S. and emerging markets to outperform U.S. stocks.
Chart courtesy of StockCharts.com