Strongest of the Strong: Another Big Year For The ETF Industry

To the surprise of no one that follows the industry, exchange traded funds notched another exceptional year of adding assets in 2015. By BlackRock Inc.'s BLK count, exchange traded products added $347 billion on a global basis last year.

New York-based BlackRock garnered $130 billion of the $347 billion that flowed into exchange-traded products last year. BlackRock, the world's largest asset manager, is the parent company of iShares, the world's largest ETF sponsor.

“U.S. ETFs gathered $40 billion in the month of December, driving the full year inflows to $242 billion, according to data from etf.com.  In 2015, international equity ETFs added more than $109 billion of fresh money while U.S. equity and U.S. fixed income offerings added $61 billion and $56 billion, respectively. S&P Capital IQ thinks this is impressive as the U.S. equity market was down fractionally on a price basis for the year,” said S&P Capital IQ in a new research note. 

As Benzinga reported Tuesday, five of last year's top 10 asset-gathering ETFs were iShares funds. Another prominent theme last year was investors favoring international equity ETFs, a trend that benefited currency hedged ETFs, such as the WisdomTree Europe Hedged Equity ETF HEDJ and the Deutsche X-trackers MSCI EAFE Hedged Equity DBEF. HEDJ was the top asset-gathering ETF last year while only two funds added more new assets than DBEF.

WisdomTree Investments Inc. WETF, “the fifth-largest provider, gathered $16 billion in 2015, the third most in the growing industry. Approximately 82% of WETF’s asset growth came from demand for its popular HEDJ. S&P Capital IQ has research on 81 other ETFs offered by WisdomTree including some strong U.S. dividend ETFs, but the firm’s success has recently been driven by interest in currency hedged European assets,” said S&P Capital IQ.

Vanguard, the second-largest U.S. ETF sponsor, was last year's number two asset gather as the Vanguard S&P 500 ETF VOO and the Vanguard Total Stock Market ETF VTI combined to add over $20 billion in new assets. Overall, ETFs issued by Pennsylvania-based Vanguard took in $76.4 billion in new assets last year, according to S&P Capital IQ.

The ETF industry has been torrid asset-gathering pace, having doubled in size between 2011 and 2014. On the surface, it would appear such a pace would be difficult to maintain. However, some industry insiders believe another double is on the way.

“Last month, SNL Financial’s Matt MacFarland wrote that BlackRock President Robert Kapito said the ETF market “in the next three to four years is going to double in size”, drawing a comparison between the rise in ETFs and that of mutual funds in the 1970s,” according to S&P Capital IQ.