The value of assets invested in exchange-traded funds (ETFs) and exchange-traded products (ETPs) is expected to increase by 20-30% annually over the next three years, reaching US$2 trillion by early 2012, according to a study carried out by investment management firm BlackRock.
ETFs are index-based open-ended funds that can be bought and sold like ordinary shares on a stock exchange. ETPs include other products such as trusts, partnerships, commodity pools and notes. The global ETF and ETP industry combined totalled 3,503 products with 7,311 listings and assets of US$1.482 trillion, from 168 providers on 50 exchanges, as of 31 December 2010.
“The industry grew across the board during 2010 and we expect this to continue in 2011,” said Deborah Fuhr, global head of ETF research and implementation strategy at BlackRock. Equity ETFs/ETPs attracted US$106.3 billion in net new asset flows in 2010, a significant increase on US$69.1 billion for 2009.
Factors identified in the growth of ETF usage included the number and types of equity, fixed income, commodity and other indices covered, the embrace of ETFs by more fund platforms, the growing number of exchanges planning to launch ETFs and regulatory changes in the US and Europe that allow funds to make larger allocations to ETFs.
BlackRock predicts that assets under management for ETFs will reach US$2 trillion globally by the end of 2012, US$1 trillion in the US in 2011 and US$500 billion in Europe in 2013.
“ETFs make it easier for investors to participate in all domestic asset classes, global regions and industry sectors,” added Fuhr. “Most importantly, ETFs give investors the opportunity to participate where markets have been showing promise.”
Banking group HSBC recently launched an ETF covering Chinese stocks, that will be listed on the London Stock Exchange to coincide with the start of the Chinese New Year.