Gen X, Millennials Driving ETF Growth

Last year was another banner year of growth for the exchange-traded funds industry. Here in the United States, the world's largest ETF market, ETFs gathered $279 billion in new assets on their way to a record assets under management tally of $2.549 trillion at the end of the year, according to ETFGI, a London-based ETF research provider.

“At the end of 2016, the U.S. ETF/ETP industry had 1,969 ETFs/ETPs, assets of US$2.549 trillion, from 105 providers listed on three exchanges,” said ETFGI.

While previously released data suggest ETFs are a hit among investors across multiple age groups, BlackRock, Inc. BLK's BlackRock ETF Pulse Survey released last week indicates Gen X and millennials are major contributors to ETF growth.

Survey Says

“The survey also reveals that one in four investors already use ETFs, and that these investors tend to be younger, more engaged in managing their finances, and optimistic about their financial futures than the overall investment population. More than 8 in 10 (82 percent) of financial advisors currently use ETFs in the portfolios they manage,” said BlackRock in a statement.

New York-based BlackRock is the world's largest asset manager and parent company of iShares, the world's biggest ETF sponsor.

Data also suggest that among various generations, millennials are most engaged with ETFs, though millennials and Gen X actively sought additional ETF education last year.

“More Millennials are currently invested in ETFs than investors on average (33 percent vs. 25 percent). Millennials investors (45 percent) and Gen X investors (38 percent) also took the biggest “learning steps” with ETFs last year, and plan to continue learning more in 2017,” said BlackRock.

A third of millennials and 26 percent of Gen X investors are currently invested in ETFs compared to 24 percent of baby boomers, according to BlackRock data. An average of 58 percent of millennial and Gen X investors plan to learn more about ETFs this year compared to just 48 percent of baby boomers.

Among individual investors surveyed by BlackRock, reasons widely cited for embracing ETFs include low fees, low costs to buy and sell the products and the ability to easily diversify while reducing risk.

In October, BlackRock unveiled fee cuts for 15 of its 20 iShares core ETFs, a suite of ETFs aimed at cost-conscious, long-term investors.