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Magoon: State Of ETF Union Strong & Healthy
By Christian Magoon | January 23, 2013

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Editor’s note: ETF industry veteran Christian Magoon today begins a twice-a-month blog for IndexUniverse.

 

The “State of the Union” for ETFs is stronger than ever as we dive into 2013. New milestones are being reached within ETFs, most notably assets under management hitting all-time highs.

ETFs are playing an increasingly significant role in the overall investment landscape. From ETF trading activity to the amount of U.S. equity ownership ETFs represent, the ETF market commands respect. Let's review a few notable numbers relating to the ETF vehicle.

Trading

Based on the average daily value of securities traded in 2012, four ETFs made the top five most-traded securities in the United States, according to Barron's. The ETFs making the top five were SPY, QQQ, IWM and EEM. Joining these four ETFs in this elite category was a stock you may have heard of, Apple.

U.S. Stock Ownership

ETFs now account for 4.05 percent of all U.S. stock ownership, according to Federal Reserve statistics through the third quarter of 2012, as reported by Macro Market Monitor. While that may seem small, consider just six years ago (Q3 of 2006) that ETFs owned 1.52 percent of U.S. stocks. That's a growth rate of 266 percent. Contrast that growth with the decline in mutual funds ownership from 20.41 percent of U.S. stocks in 2006 to 19.38 percent today. Although the vehicles are still far apart, the ownership gap is shrinking.

2012 Fund Flows

ETFs gathered a record $188 billion in new assets in 2012, according to IndexUniverse’s year-end data. This all-time ETF inflow record was 7 percent higher than 2008's record of $175 billion. Equity ETFs led with $121 billion of inflows, while bond ETFs saw $56 billion of new assets. These numbers mean more when compared to the mutual fund flow numbers of 2012. Equity mutual funds lost $147 billion, a staggering loss compared to the strong gain ETFs experienced. Bond mutual funds gathered $300 billion in new assets. This was a similar directional—but vastly larger—move, than bond ETFs. However, it is notable that bond ETFs are an emerging product set in terms of breadth and track record.

Overall, the ETP industry finished 2012 with $1.3 trillion in assets, about 250 percent more than four years before. All types of market participants are finding value in the efficiency, transparency and flexibility that many ETFs provide.

 

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