A Banner Year Of Asset Growth For iShares ETFs

Investors continued pouring assets into exchange-traded funds last year, sending global ETF assets under management to another all-time on the heels of record asset gathering of $375 billion.

Predictably, those trends benefit the largest ETF issuers, including BlackRock, Inc. BLK's iShares unit, the world's biggest ETF sponsor. In data released Tuesday, BlackRock said its iShares unit hauled in a whopping $140 billion in new ETF assets in 2016.

iShares' Renown

Last year, the top 10 asset-gathering ETFs in the U.S. hailed from the three largest issuers – iShares, Vanguard and State Street with iShares having five of those funds. With $13.1 billion in 2016 inflows, the iShares S&P 500 Index (ETF) IVV was the top asset gatherer among iShares ETFs and the second-best U.S. overall in terms of new assets added.

The top two fixed income ETFs for new assets gained in 2016 were also iShares products, the iShares Barclays Aggregate Bond Fund AGG and the iShares Barclays TIPS Bond Fund (ETF) TIP. No emerging markets ETFs could keep pace with the $7.4 billion added by the iShares Inc. IEMG last year.

In October, iShares unveiled fee cuts to a significant portion of it core lineup, including the aforementioned AGG, IEMG and IVV.

Core Lineup, Strategies

The iShares core lineup, comprised of 20 ETFs, added $67 billion last year, according to BlackRock data.

Smart beta or factor-based ETFs, such as the iShares Trust USMV, remain prolific asset gatherers.

“Demand for iShares global smart beta ETFs surged to record highs, with $20 billion of net inflows. iShares was number one in smart beta market share globally (37 percent), led by $9 billion of net inflows into minimum volatility ETFs, with USMV seeing net inflows of $4.2 billion,” according to BlackRock.

Multi-factor and single factor ETFs are expected to be primary drivers of smart beta growth going forward along with low volatility strategies, such as USMV. BlackRock has been actively expanding the iShares multi-factor lineup in anticipation of increased demand.

Another frontier of ETF growth is expected to be institutional investors and traders moving away from derivatives and futures to realize cost savings with ETFs.

“As banks’ balance sheet costs continue to increase, so too has the cost of using futures and swaps. ETFs now typically represent not only the more cost efficient option, but can also offer greater operational simplicity and more precise exposures,” noted BlackRock.