ETFs Experience Record Issuance in 2006

The nation’s exchange-traded funds (ETFs) added $13.43 billion in assets in November, bringing the total asset count to $396.73 billion, according to the Investment Company Institute. By far the bulk of that asset increase was due to rising equity markets, but the number was helped along by net new issuance of more than $3 billion. Year-to-date, ETFs have experienced $56.98 billion in net issuance, topping both the $53.87 billion in 2005 and $55.02 billion in 2004.

So far this year, the net asset increase has been fairly divided between domestic and foreign ETFs. Domestic ETFs have added $60.63 billion over the past 12 months, compared to $42 billion for international funds, which is a reasonable reflection of the approximate 50-50 split between U.S. and international market caps.

A few interesting statistics from the ICI report deserve comment.

For one, the ICI statistics emphasize the fact that most ETFs are held for a vanishingly small time period. As mentioned, there are currently $397 billion in ETF assets. So far this year, there have already been $395 billion in gross ETF issuance. Similarly, there has been $338 billion in gross redemptions. In other words, the average ETF share exists for less than year before it is recycled through the system.

Another stat that stands out in the report is the fund count. There are currently:

• 244 domestic equity ETFs
• 83 international ETFs
• 6 bond ETFs

Which one of those numbers jump out at you?

Although there are more bond ETFs in development, the paucity of offerings is baffling. The existing six iShares funds are good funds, with broad diversification and low fees. But you would think that someone would push the boundaries here…