Global ETF industry recorded net inflows of $80bn in May

Asset class has attracted inflows of about $418bn from January, ETFGI report finds

ETFs recorded $1.14 trillion in net inflows over the past 12 months. Getty

The global exchange-traded funds industry attracted $80.28 billion in May, bringing net inflows this year's inflows to $417.87bn, even as inflation concerns and US Federal Reserve rate increases weigh on markets, a report has said.

Assets invested globally in the ETF industry hit $9.46 trillion at the end of May, up 1 per cent from $9.36tn at the end of April, but down 7.9 per cent from $10.27tn at the end of 2021, the report by research and consulting company ETFGI found.

An ETF is a type of pooled investment security that operates in the same way as a mutual fund, according to Investopedia.

Typically, ETFs track a particular index, sector, commodity or other asset, but unlike mutual funds, they can be purchased or sold on a stock exchange, similar to a regular stock.

Globally, the number of ETFs grew to 8,552 in 2021, from 276 in 2003, according to Statista.

ETF assets under management worldwide will reach at least $18tn by 2026, at a 14.6 per cent compound annual growth rate between June 2021 and June 2026, a report by PwC found.

The global ETF market has built up “phenomenal momentum” over the past five years, with the Covid-19 pandemic further highlighting “ETFs’ remarkable resilience and growth potential”, the report said.

“Having steered through the market uncertainty and volatility of 2020 and 2021, ETFs are emerging from the crisis stronger than ever — bolstered by a surge in fund inflows, new entrants and product innovation.”

While equity and fixed-income products remain the ETF market’s largest segments, it is becoming more diverse with digitisation of ETF distribution also offering more scope for expansion geographically, the PwC report said.

Net inflows into ETFs so far this year are the second highest on record, compared to net inflows of $572.36bn in the same period in 2021, according to the ETFGI report.

ETFs recorded $1.14tn in net inflows in the past 12 months, while the industry recorded 36 months of consecutive net inflows, the research revealed.

Net inflows into fixed-income products stood at $34.37bn last month. However, they are down 13 per cent annually at $81.11bn so far this year.

Meanwhile, equity products recorded net inflows of $35.62bn in May, with year-to-date net inflows down more than 38 per cent annually at $245.06bn, ETFGI said.

Net inflows for equity ETFs and exchange-traded products (ETPs) listed globally stood at $35.62bn in May. Investors tended to invest in equity products during the month, the report said.

ETPs are types of securities that track underlying securities, an index or other financial instruments, according to Investopedia. While ETPs trade on exchanges, similar to stocks, their prices are derived from the underlying investments that they track.

“The S&P 500 was up 0.18 per cent in May but is down 12.76 per cent in the first five months of 2022, as inflation concerns, along with Fed rate hikes, weighed on markets,” said Deborah Fuhr, managing partner, founder and owner of ETFGI.

Developed markets, excluding the US, gained 0.73 per cent in May but are down 11.73 per cent so far this year, with Portugal (up 7.05 per cent) and Spain (up 4.67 per cent) posting the largest increases, she said.

“Emerging markets increased by 0.03 per cent during May but are down 11.53 per cent YTD [year to date],” Ms Fuhr said.

“Chile [up 19.75 per cent] and Colombia [up 9.02 per cent] saw the largest increases among emerging markets in May, while Hungary [down 13.81 per cent] and Pakistan [down 10.51 per cent] saw the largest declines.”

The top 20 ETFs collectively attracted $55.63bn during May, with iShares Core S&P 500 ETF gathering $8.07bn, the largest individual net inflow, according to the report.

Meanwhile, the top 10 ETPs collectively recorded inflows of $1.63bn in May. Invesco DB US Dollar Index Bullish Fund gathered $514 million, accounting for the single largest individual net inflow, the report showed.

Updated: June 15, 2022, 8:32 AM