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Exchange Traded Funds: Q4 2020 Market Overview

28 January 2021

The last quarter of 2020 has seen a continuation of positive flows across all major asset classes with a global total net inflow of $246 billion, as markets rebound from the impact of coronavirus throughout spring and early summer.

Equity ETFs drove the bulk of this investment with a November monthly peak of $112 billion net new assets fueled by market optimism around vaccine approvals across all major markets, on top of optimism around a potential stimulus package in 2021 after Joe Biden's election victory. When combined across all asset classes this also set a record for highest single monthly inflow.

Fixed income ETFs saw $67 billion of new investment as their popularity continues to surge after avoiding the mass-predicted 'liquidity crunch' in the wake of the market volatility of March. Fixed income flows and performance remained steady throughout as investors look to get exposure to the credit tightening and sovereign yield retreat as central banks shored up the markets globally.

Within ETF issuers, the winners were undoubtably Blackrock and Vanguard when looking at AUM increases (total net inflows of $83 billion and $74 billion respectively). Both also dominate the individual fund list for the period, with 8 out of the top 10 fund inflows between them and the Vanguard Total Stock Market ETF attracting the most with $14.6 billion over the last three months of 2020. When viewed as a percentage of total Issuer AUM, there are also notable increases for UBS (9.4%), Van Eck (8.7%), JP Morgan Chase (7%), and 5% for Charles Schwab, First Trust and DWS.

Ark Investment Management leads the way amongst all other ETF issuers over the past 3 months with new AUM of approximately 77% of the previous quarter's total AUM. Ark's actively managed thematic ETFs focus primarily on innovation within technology and sciences that has benefited from strong returns with exposure to many of the biotech firms involved in the Covid-19 vaccine research. This was led by the ARK Innovation ETF with a 37% total return and ARK Genomic Revolution Multi-Sector ETF with an impressive 48% total return.

ETF launches towards the end of 2020 follow 3 main themes. Within Equity ETFs notable launches focused on US innovation with Invesco Nasdaq Next Gen 100 ETF and Goldman Sachs Innovate Equity ETF drawing the heaviest inflows ($586m and $340m). Issuers also continued to introduce ETFs designed to mimic staples of their existing index funds range (Dimensional US Core Equity Market ETF & Invesco Nasdaq 100 ETF) as investors increasingly moved AUM out of traditional mutual funds and investment trusts and into equivalent ETFs.

Fixed income ETFs also continue to see new launches with State Street launching multiple funds headlined by the SPDR Bloomberg Barclays Euro Govt Bond UCITS ETF and SPDR Bloomberg SASB Euro Corporate ESG UCITS ETF.

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Thomas Runciman, ETF Product Specialist, ETF and Benchmarking Solutions

IHS Markit provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.

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