It’s not just in the United States where exchange-traded funds (ETFs) are becoming the investment vehicle of choice. A recent Financial Times article pointed out that ETF inflows all around the world jumped 40% despite the economic effects of the Covid-19 pandemic.
“Net flows into exchange traded funds have jumped 40 per cent so far this year with the growing shift into low-cost index tracking vehicles forcing the pace of consolidation across the asset management industry to accelerate markedly,” the FT article said. “Morgan Stanley agreed last week to stump up $7 billion to acquire Eaton Vance while Franklin Templeton paid $6.5 billion to buy Legg Mason earlier this year, two deals that illustrate how traditional active managers are being compelled to reconfigure their businesses in response to ferocious competition from ETF providers.”
“The pressures on active fund managers to find ways to respond to the rise of ETFs have become irresistible. The growth of ETFs is a global tectonic shift that has gathered pace since the 2007/08 financial crisis.” said Deborah Fuhr, founder of ETFGI, a London-based consultancy.
Speaking of active management, ETF investors who want exposure to actively managed funds can look to the JPMorgan Ultra-Short Income ETF (JPST). In a time where interest rate yields are at historic lows, mining for income opportunities might be best in the hands of professionals.
JPST seeks to provide current income while seeking to maintain a low volatility of principal. Under normal circumstances, the fund seeks to achieve its investment objective by investing at least 80% of its assets in investment grade, U.S. dollar-denominated short-term fixed, variable, and floating rate debt.
“Investors have ploughed $488.2 billion into ETFs (funds and products) in the first nine months of the year compared with $349 billion in the same period in 2019, according to ETFGI,” the article added.
Vanguard Leading the Pack
As far as who has pole position in terms of attracting investors capital, that honor goes to Vanguard. In a time where competition is fierce in the ETF landscape, Vanguard has managed to emerge head and shoulders above the rest for now.
“Vanguard holds a clear lead over rival ETF providers as the race to attract investors’ cash enters the final quarter of 2020,” the FT article said. “Pennsylvania-based Vanguard registered net ETF inflows of $134.3 billion in the first nine months of 2020, up 73 per cent on the same period last year and already surpassing the $119.3 billion it gathered over the whole of 2019.”