New research from Morgan Stanley said that inflows into U.S.-listed ETFs topped $11.6 billion in the first three months of 2007, bringing total ETF assets in the U.S. to approximately $480 billion. That actually represents a significant slowdown in asset growth, as it calculates out to just 10 percent annualized growth. In comparison, the industry grew 40 percent in 2006.
The slowdown raises questions about the hype surrounding the ETF space. Venture capital funds and industry boosters have been saying that ETF assets will hit $2 trillion by 2010. To do that, however, asset growth must run at a 60 percent annualized clip for the next four years. 10 percent just ain’t going to get it done. There are ways the industry could do that --- if it moves into the 401(k) market in a serious way; if all the work companies have been doing to market to financial advisors starts to bear fruit; etc. --- but right now, that $2 trillion number is a long ways off.
One area of the market is growing fast, however: listings. Morgan Stanley said 95 new ETFs listed in the first quarter of the year, bringing the total number of ETFs on the market to 469. In comparison, just 12 new ETFs listed in the first quarter of 2006.
Where are all the assets going? Into a handful of funds and players. Morgan Stanley said that two ETF providers (Barclays Global Investors and State Street Global Advisors) together had nearly 80 percent of all assets, with the 15 other providers fighting over the crumbs.
The ten fastest growing funds in Q1 2007 were:
The ten largest ETFs by net assets were:
The top ten ETF providers by assets are: