New Record for Global ETF, ETP Investing

September 7th, 2012
in econ_news, syndication

Econintersect:  Global assets in ETFs (exchange traded funds) and ETPs (exchange traded products) have increased to a record $1.76 trillion as of 31 August 2012) according to ETFGI LLP.  The rapid growth of assets invested in electronically traded products since 2000 is shown in the following graphic from Larry Barrett at Financial Planning (last data shown is January 2012):

etf-etp-growth-since-2000-380px

Follow up:

According to the data from ETFGI the assets invested in all global ETPs has increased 15.5% for the first seven months of 2012.  The growth of ETPs has actually been fast than projected less than two years ago by Strategic Insight:

etf-growth-expected

There are a number of reasons for the growth of ETPs.  A summary from Greg Wirth at Securities Technology Monitor:

An initial favorite with retail investors, now ETFs are becoming more widely used by institutional investors and financial advisors for a variety of reasons, including:

  • to equitize cash;
  • to gain diversified exposure to a market;
  • as a long-term, core or secondary investment;
  • to make strategic adjustments to portfolios;
  • as building blocks to create new portfolios;
  • as a market hedge; and
  • as an alternative to futures and other derivative products.

As significant as the growth of ETFs has been, there is still a long way to go to catch up with traditional mutual funds, which now total more than $12 trillion in assets, up 6.2% from the end of 2011.  The details are shown in the following table from the Investment Company Institute (ICI):

mutual-funds-total-assets-2012-Aug-30

If both mutual funds and ETPs continued to grow assets at the 2012 rate, ETPs would catch up with traditional mutual funds in 2027.  Both categories would have about $61 trillion in assets at that 15-year distant date.  Of course, whatever happens for either class of investment vehicle, it is almost certain that 2012 growth rates will not turn out to be the average for the next 15 years in either case.

John Lounsbury

Sources:









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