Global ETF Industry Extends Lead Over Global Hedge Fund Industry To $1.3 Trillion Through Q3 2017

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Includes: AGG, BND, EEM, EFA, IEFA, IEMG, IJH, IVV, IWD, IWF, IWM, LQD, QQQ, SPY, VEA, VOO, VTI, VWO
by: Deborah Fuhr

Summary

Assets invested in global ETF industry extend lead over assets in global hedge fund industry to $1.318 trillion.

Record $4.470 trillion invested in 7,060 ETFs/ETPs listed globally at the end of Q3 2017.

7.3% growth in assets invested in ETFs over Q3 2017 outpaces 1.7% growth in assets in hedge funds.

All dollar values are in U.S. Dollars unless otherwise noted.

ETFGI, a leading independent research and consultancy firm on trends in the global ETF/ETP ecosystem, reported today that assets invested in the global ETF/ETP industry extended their lead over assets invested in the global hedge fund industry to $1.318 trillion at the end of Q3 2017, an increase of 23% over the gap at the end of Q2 2017.

According to ETFGI’s analysis a record $4.470 trillion were invested in 7,060 ETFs/ETPs listed globally at the of Q3 2017, representing growth in assets of 7.2% over the quarter. Over the same period assets invested in hedge funds globally grew by only 1.7%, to a record $3.152 trillion in 8,255 hedge funds at the of Q3 2017, according to a report by Hedge Fund Research.

Assets invested in the global ETF/ETP industry first surpassed those invested in the hedge fund industry at the end of Q2 2015, as ETFGI had forecasted. Growth in assets in the ETF/ETP industry has outpaced growth in the hedge fund industry since the financial crisis in 2008:

Growth in ETF/ETP and hedge fund assets Sources: Hedge Fund Research HFR, ETFGI

Investors have become disappointed with the high fees, performance and lack of liquidity of hedge funds over the past few years. In Q3 2017, the performance of the HFRI Fund Weighted Composite Index was 2.27%, significantly lower than the 4.48% return of the S&P 500 Index. In each of the past six years the performance of the HFRI Fund Weighted Composite Index was significantly lower than the return of the S&P 500 Index:

Annual returns of the HFRI Fund Weighted Composite Index and the S&P 500 IndexAnnual returns of the HFRI Fund Weighted Composite Index and the S&P 500 Index

Sources: Hedge Fund Research HFR, S&P Dow Jones Indices

During Q3 2017, ETFs/ETPs listed globally gathered $135.3 Bn in net inflows, according to ETFGI’s Global ETF and ETP industry insights report. The end of September 2017 marked the 44th consecutive month of net inflows into ETFs/ETPs. In contrast, HFR reported that hedge fund investors created $1.7 Bn during Q3 2017.

Net New Asset (NNA) flows into ETFs/ETPs and hedge funds globally, as at end of September 2017

Net New Asset (NYSE:<a href='https://seekingalpha.com/symbol/NNA' title='Navios Maritime Acquisition Corporation'>NNA</a>) flows into ETFs/ETPs and hedge funds globally, as at end of September 2017

Sources: Hedge Fund Research HFR, ETFGI

For reference, the top 20 ETFs account for 29.6% of global ETF assets. The largest ETF: SPDR S&P 500 ETF Trust (NYSEARCA:SPY) on its own accounts for 5.7% of assets.

Name

Country listed

Ticker

Assets
(US$ Mn)
Sep-17

ADV
(US$ Mn)
Sep-17

NNA
(US$ Mn)
YTD 2017

SPDR S&P 500 ETF Trust

USA

SPY US

243,281

14,561.9

(7,132)

iShares Core S&P 500 ETF

USA

IVV US

125,120

823.5

23,732

Vanguard Total Stock Market ETF

USA

VTI US

83,595

200.2

5,833

iShares MSCI EAFE ETF

USA

EFA US

80,362

948.1

9,485

Vanguard S&P 500 ETF

USA

VOO US

74,153

347.2

9,958

Vanguard FTSE Developed Markets ETF

USA

VEA US

62,885

270.6

14,163

Vanguard FTSE Emerging Markets ETF

USA

VWO US

62,333

395.6

8,542

TOPIX Exchange Traded Fund

Japan

1306 JP

53,892

34.0

14,828

PowerShares QQQ

USA

QQQ US

52,367

4,166.9

1,325

iShares Core U.S. Aggregate Bond ETF

USA

AGG US

50,357

240.5

8,058

Nikkei 225 Exchange Traded Fund

Japan

1321 JP

44,010

46.7

5,439

iShares Russell 2000 ETF

USA

IWM US

41,079

3,188.0

(1,170)

iShares Core S&P Mid-Cap ETF

USA

IJH US

40,200

159.4

3,245

iShares iBoxx $ Investment Grade Corporate Bond ETF

USA

LQD US

37,840

654.7

10,020

iShares Core MSCI Emerging Markets ETF

USA

IEMG US

37,412

319.9

13,478

iShares Russell 1000 Value ETF

USA

IWD US

37,269

181.6

284

iShares Russell 1000 Growth ETF

USA

IWF US

37,160

177.2

(1,360)

iShares Core MSCI EAFE ETF

USA

IEFA US

36,873

275.4

16,828

Vanguard Total Bond Market ETF

USA

BND US

35,819

127.6

3,875

iShares MSCI Emerging Markets ETF

USA

EEM US

35,350

2,191.8

2,632

Source: ETFGI

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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