ETP Assets Finally Overtake Hedge Funds

At the end of Q2 ETP assets stand at $2.971 trillion across 5,823 ETFs and ETPs, $2 billion more than hedge funds

Editor, Europe
Reviewed by: Rachael Revesz
Edited by: Rachael Revesz

The end of the second quarter has seen exchange traded products (ETPs) and funds finally overtaking assets in hedge funds, new data from ETFGI has revealed.

There are $2.971 trillion across 5,823 ETPs and ETFs at the end of June, slightly shy of their $3.015 trillion record at the end of 2015. However, hedge fund asset have $2 billion less as global assets stand at $2.969 trillion acrosss 8,497 hedge funds, according to Hedge Fund Research.

In 2007, hedge funds grew to almost $2 trillion, yet ETFs were still trying to catch up with around $7550 billion invested. The difference is very different today.

Net flows during the first quarter saw ETFs/ETPs grow by $152.3 billion, while just $39.7 billion was invested in hedge funds.

ETPs are 25 years old, offering various exposured to hedge fund-style strategies, while hedge funds themselves have been around for 66 years.

The S&P 500 Index has beaten the HFRI Fund Weighted Composite Index every year since 2011, and shot ahead at 32.3 percent in 2013, compared to the hedge fund index’s 9.1 percent in the same year.

“With the positive performance of equity markets many investors have been happy with index returns and fees,” read the ETFGI report.

According to ETFGI research the asset-weighted average annual cost for ETFs/ETPs is 31 basis points or less than one third of a percent, while fees charged by the majority of hedge funds are 2 percent of assets and 20 perent of profits.

Rachael Revesz joined in August 2013 as staff writer. Previously an investment reporter at Citywire, she has a background in writing content for retail financial advisors and has covered a wide range of subjects in finance. Revesz studied journalism at PMA Media, which has since merged with the Press Association. She also holds a B.A. in modern languages from Durham University, as well as CF1 and CF2 financial planning certificates from the CII.