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Categorized | Financial

Global ETF sector in line for record year

Posted on September 30, 2012

Investors are on course to put a record amount of money into exchange-traded funds this year after the investment vehicles attracted their third-highest monthly inflows on record in September.

Net new global inflows into ETFs and associated products reached $43.3bn in September, the highest since December 2008, according to data from BlackRock, the world’s largest money manager.

    The announcement of fresh asset purchasing measures by central banks in the US, Europe and Japan early in September boosted risk appetite with investors turning to ETFs to invest quickly across a wide range of asset classes.

    ETFs have gathered $182.6bn so far in 2012, up 42 per cent on the same period last year and already surpassing 2011’s full year total of $173.4bn.

    ETF inflows often strengthen in the fourth quarter and some industry executives are predicting that inflows this year will beat 2008’s record of $259.7bn.

    “September was an exceptionally strong month for the global ETF industry as additional monetary easing by major central banks served as a catalyst for investors to move into risk assets,” said Dodd Kittsley, global head of ETP research at BlackRock.

    Mr Kittsley said September’s news of fresh stimulus measures by the three central banks had encouraged more ETF inflows than the previous round of quantitative easing announced by the US Federal Reserve in November 2010.

    US equity ETFs attracted $23.4bn in September, more than half of the industry’s global inflows, helped by the Federal Reserve’s promise to buy more mortgage backed securities as part of a third round of quantitative easing.

    The European Central Bank’s announcement of plans to expand its bond buying programme sparked a recovery for interest in pan-European equity ETFs which gathered inflows of $3.1bn last month, the highest since October 2008.

    Fixed-income ETFs, said Mr Kittsley, had also shown evidence of investors adopting a more positive attitude to risk. While $2.2bn was withdrawn from US government bond linked ETFs, investors committed $3.7bn to investment grade corporate bond and high yield ETFs last month.

    The gold market has also rallied since the Fed announced QE3 with exchange trade gold products gathering inflows of $3.8bn last month. Concerns about the outlook for the euro have also led to growing interest in gold from European investors who have contributed almost half – $4.9bn – of this year’s total inflows of $10.7bn into gold ETPs.

    US managers are competing in an ETF price war to win a share of cash flowing into the industry. Charles Schwab, the US financial services company, last month cut fees across its entire ETF range, stealing the title of lowest cost from Vanguard.

    BlackRock, the world’s largest ETF manager, is expected to announce fee cuts for some of its iShares ETFs provider before the end of the year to respond to price competition from Vanguard.