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Home > Investments > ETFs & Trackers

From Special Report:

ETFs: A hive of activity

The difference in usage patterns of equity and fixed income ETFs is driven by familiarity with the products, the array of available products and investor’s views on which asset classes and areas of the market they want to be allocating new assets to or reducing their exposure.

By Deborah Fuhr | Published Jun 26, 2013 | comments

The very first ETF was listed just over 23 years ago in Canada on 9 March 1990 on an equity index. Ten years later the very first fixed income ETF was listed on 20 November 2000 in Canada.

In Europe the first ETF was listed on the Deutsche Borse on 11 April 2000 on the Euro Stoxx 50 index 10 years after the first equity ETF was listed in Canada. The first fixed income ETF was listed in Europe on the Deutsche Borse on 6 February 2003.

At the end of May 2013, the global ETF/ETP industry had 4849 ETFs/ETPs, with 9875 listings, with a record level of US$2.14 trillion (£1.36 trillion) in assets under management, from 211 providers on 56 exchanges. There are 2,414 Equity ETFs/ETPs with $1.5 trillion (£950m) in assets while there are only 679 fixed income ETFs/ETPs with $335bn (£213bn) see table 1.

Nearly half of all ETFs/ETPs and 72 per cent of all assets provide exposure to equity benchmarks with products providing exposure to fixed income benchmarks are a distant second in terms of number of products and 16 per cent of all assets invested in ETFs/ETPs.

The net flows into and out of ETFs/ETPs is a very timely gauge of investors’ sentiment. Political and economic expectations concerning the quantitative easing programmes in the US and Japan combined with equity market rallies have been drivers of flows. Investors have and are searching for yield or income. Dividend yields on equities have been higher than yields in fixed income. Investors have seen the price of gold drop significantly this year and the expectation of rising real interest rates will continue to put pressure on gold.

Investors have been investing to participate in the equity market in the US and Japan and looking for income from high dividend ETFs and other alternative equity beta strategies. Investors have been net sellers of exposure to gold and have been investing smaller amounts in fixed income exposures this year versus last year due to concerns about the easing of QE.

In May 2013, global ETFs/ETPs saw net inflows of $24.8bn (£15.7bn). Equity ETFs/ETPs gathered the largest net inflows with $24.7bn (£15.7bn), followed by fixed income ETFs/ETPs with $3bn (£1.9bn), while commodity ETFs/ETPs experienced the largest net outflows with $6.5bn (£4.1bn).

Year to date through end of May 2013, ETFs/ETPs have seen a record level of net inflows of $108bn (£67bn). Equity ETFs/ETPs gathered the largest net inflows year to date with $94bn (£60bn), followed by fixed income ETFs/ETPs with $19.5bn (£12.4bn), while commodity ETFs/ETPs experienced net outflows of $24bn (£15.2bn).

In Europe the ETF/ETP industry had 1964 ETFs/ETPs, with 6177 listings, assets of $381bn (£242bn), from 49 providers on 23 exchanges at the end of May 2013. The patterns of net inflows and outflows in Europe are similar to the global trends with equity ETFs/ETPs gathering the largest net inflows with $1.1bn (£699m), fixed income had inflows of $224m (£142m) and Commodity ETFs/ETPs experienced net outflows of $2.5bn (£1.6bn).

Year to date through end of May 2013, ETFs/ETPs have seen net inflows of $5.9bn (£3.7bn) Equity ETFs/ETPs gathered the largest net inflows year to date with $6.7bn (£4.2bn) followed by fixed income ETFs/ETPs with $3.7bn (£2.3bn), while commodity ETFs/ETPs experienced net outflows year to date of $5.7bn (£3.6bn).

Deborah Fuhr is a partner of ETFGI

Key points

* The difference in usage patterns of equity and fixed income ETFs is driven in part by familiarity with the products.

* The net flows into and out of ETFs/ETPs is a very timely gauge of investors’ sentiment.

* In Europe the ETF/ETP industry had 1964 ETFs/ETPs, with 6177 listings, assets of $381bn (£242bn), from 49 providers on 23 exchanges at the end of May 2013.

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