An increasing number of investors hold ETFs in their portfolio. According to research firm ETFGI, global investments in ETFs recorded a record inflow of $319.4 billion for the year as of November. This is an increase of 15% compared to the same period last year. Total assets now stand at a record $3.0 trillion. US-listed ETFs are still the largest group with total assets of $2.1 trillion. This group also witnessed the largest inflow with a record $201.7 billion of fresh money. This was a plus of 5% compared to last year. There are now 1,824 ETFs available in the US.
November was a strong month with $26 billion of new inflows for US ETFs. 2015 may see an even higher record of ETFs investments, according to Deutsche Bank. Over the last 15 years, December shows a strong record. The investment bank expects $20-25 billion of fresh assets. Particularly the popular SPDR S&P500 ETF (symbol: SPY) could expect fresh money, DB expects another $10-15 billion of inflows for SPY. Equity ETFs were by far the most popular destination for investors, adding a sold $25 billion of inflows in November. $19.6 billion went to US Equity.
An interesting development is the fast growth in low risk ETFs. This category aims to offer downward protection, but without giving up the upside movements in stock prices. iShares offers the MSCI USA Minimum Volatility (symbol: USMV) and PowerShares the S&P500 Low Volatility (symbol: SPLV) as an example. There are several variations within the low risk category, some feature currency hedging, use VIX futures to lower the negative effects of volatility, but also defensive equities or a high dividend strategy could be considered. During the last 12 months, low risk ETFs saw a net inflow of $9.6 billion. According to DB, on a relative basis this was 6 times larger than conventional ETFs. DB tracks 43 ETFs within the low risk category. For the record, above mentioned low risk ETFs outperformed the broader market with a 2015 yield of 4.7% (USMV) and 3.3% (SPLV), compared to 2.2% for SPY.
The battle between active and passive is shifting further in favor of passive. Until October 2015, mutual funds (active) saw outflows of $16 billion. This doesn’t come as a surprise since a lot of media attention is going to ETFs these days. Furthermore, the continuous launch of new ETFs, for instance in the smart-beta category, gives investors a lot more choice. Deutsche Bank reports that smart-beta raised $63 billion in cash since the beginning of 2015. Nevertheless, with $16 trillion in asset, the mutual fund industry is still significantly larger.
At bottom line, the success story of ETFs is continuing and seems stronger than ever. But before the category will grow ahead of the actively managed mutual fund industry, it will take some more years with impressive growth. Smart investors probably made the switch already.