2019 has been a record year for ETFs, setting a new record high of $4.15 trillion in invested assets by the end of October.
ETF net inflows increased from $219 billion in 2018 to $222.5 billion, according to ETFGI, a research and consulting firm.
So, what’s caused the growth of ETFs over the past year? Credit current events, said Deborah Fuhr, managing partner, founder and owner of ETFGI.
“The Fed rate cut and the looming hope for an agreement between US-China shaped a favorable investment environment in equity markets globally, which led the S&P 500 to gain 3.2% during October,” Fuhr said. “International markets also gained, with the S&P Developed Ex-U.S. and the S&P Emerging BMI both up 4%. The better performance of the equity markets reflected into a new record high of $4.15 trillion and higher inflows of ETFs exposed to equity indices rather than fixed income.”
Another highlight for ETFs this year was the increase in assets invested, which increased by 2.6% in late October.
A Sign of Things to Come?
2019 was a such a good year for ETFs that industry experts are predicting another stellar year for the funds in 2020. As far as what ETFs are going to see a surge in the year ahead, experts say cannabis, gold, oil and emerging markets.
What experts aren’t sure of in 2020 is how the Securities and Exchange Commission’s approval of nontransparent ETFs earlier this year will help or hinder that growth.
Nontransparent funds are just as they sound, nontransparent, keeping their holdings confidential until quarterly reviews. Experts say the perk of these funds is that they are more tax-efficient and comparably structured to mutual funds, making them easy to use.
The nontransparent funds sector is already fast-growing with Fidelity and T. Rowe Price obtaining approval from the SEC for their version of these funds.
Dave Nadig, managing director of ETF.com, told CNBC to expect to see a “bunch” of ETFs launch in the first quarter.
“There’ll be a surprising amount of money in these funds out of the gate,” Nadig said. “I think a few of those funds are going to come out of the gate with big allocations, $500 million opening weeks. It’s going to be institutions coming to play. We’re going to be talking about it all year.”
2019’s Top 10 ETFs
- Vanguard Total Stock Market ETF
- iShares MSCI USA Minimum Volatility ETF
- iShares Edge MSCI USA Quality Factor ETF
- iShares US Treasury Bond ETF
- Vanguard Total Bond Market ETF
- Financial Select Sector SPDR Fund
- Vanguard Total International Bond ETF
- iShares MSCI Japan ETF
- Vanguard Value ETF
- iShares iBoxx $ High Yield Corporate Bond ETF
Cassie Miller is a contributing writer for AdvisorNews. She has spent nearly two years covering Finserv topics. She also has an extensive background in magazine writing, editing and design.