- With $505 billion of net inflows into U.S. listed ETFs year-to-date through July 26, the U.S. industry has already eclipsed the 2020 calendar year record, pushing assets up to $6.6 trillion.
- With $200 billion of new money – matching its 2020 cash haul -Vanguard has led the ETF industry, aided by broad market products, such as Vanguard S&P 500 ETF (VOO ), and more targeted ones, like Vanguard Value ETF (VTV ).
- Many more moderately sized asset managers, including Invesco and Global X, have gathered more money thus far in 2021 than they did all last year, aided by demand for Invesco S&P 500 Equal Weight ETF (RSP ) and Global X U.S. Infrastructure ETF (PAVE).
U.S. listed ETF net inflows just broke the 2020 calendar year record. There has been unprecedented demand for ETFs in the first seven months of 2021, with industry-wide net inflows of $505 billion according to CFRA’s ETF database. The previous calendar year record was set in 2020, with $504 billion. While 2020 flows were aided as fixed income and commodities ETFs punched above their weight, 2021 flows have been driven by already record demand for equity ETFs. Year-to-date, equity products gathered $384 billion of new money, over $100 billion more than all of 2020. Meanwhile, fixed income ETFs’ $116 billion is on pace to match 2020’s record inflows of $206 billion. The outlier among the asset classes has been commodities, which have slight year-to-date outflows after pulling in more than $40 billion in 2020.
Many of the larger ETF providers are ahead of their 2020 net inflows. For the second consecutive year, Vanguard is gathering the most money, pulling in $200 billion, in line with the firm’s cash haul for all of 2020. Overall ETF industry leader BlackRock (BLK) has gathered $100 billion of new money – within reach of the $122 billion reeled in during 2020 – while third largest provider State Street Global Advisors’ year-to-date $33 billion is a drop below its $35 billion 2020 total. Meanwhile, well-established firms Invesco ($26 billion vs. $21 billion),Schwab ($25 billion vs. $16 billion), JPMorgan ($18 billion vs. $12 billion), First Trust ($15 billion vs. $13 billion), and Global X ($13 billion vs. $6.6 billion) have all also gathered more money thus far in 2021 than they did in all of 2020.
Dimensional Funds, which first entered the ETF market in 2020, converted a few mutual funds to ETFs in the first half of 2021 and pulled in approximately $8 billion – 10th most among asset managers. While ARK Funds has not yet passed its $21 billion net inflows, the $15 billion the firm has gathered in 2021 is also impressive given ARK’s relatively limited lineup of mostly active ETFs in a still dominant index-based ETF business.
Shifting sentiment has favored certain equity strategies in 2021. While certain broad market equity and fixed income products that were popular in 2020 have continued to be well utilized in 2021, such as VOO and Vanguard Total Bond Market ETF (BND ), the new year has been a boon for certain alternatively weighted ETFs. For example, value-oriented VTV has pulled in $11 billion of new money year-to-date, double its 2020 inflows, and equally weighted RSP gathered $6 billion, a nine-fold increase. Meanwhile, thematic ETF PAVE has $2.9 billion of net inflows thus far in 2021, easily surpassing the $510 million of demand in 2020. Among sector ETFs, Financial Select Sector SPDR (XLF ) has gathered $7.8 billion in 2021, significantly more than the $1.6 billion of inflows for all of 2020.
Investors’ comfort with ETFs for strategic and tactical purposes has accelerated in the first seven months of 2021. While the pace of flows might slow down if market volatility increases in the third quarter, we think a $1 trillion cash haul in 2021 is conceivable. CFRA expects more investors to shift toward ETFs and away from individual securities and mutual funds, benefitting from the diversification, low costs, and tax efficiency. We are ready to support investor education to understand what makes each ETF different and which are best positioned to outperform.
Todd Rosenbluth is Director of ETF & Mutual Fund Research at CFRA.