Last Year Broke Closures, Flows Records

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Heather Bell, Managing Editor ETF.com

2017 was a remarkable year for the ETF industry in many ways, not the least of which was the number of funds that either made their debuts or exited quietly from the stage.

Last year saw a total of 275 ETF launches. While that’s definitely a large number, it’s not a record-breaker. It’s more than last year’s 247 launches and less than the 284 ETFs that rolled out in 2015. However, more than 300 ETFs launched in 2011, which is still the record year for new ETFs.

Closures definitely that represent the more interesting story, with the number hitting yet another record for the second year in a row. The prior year, 2016, saw 128 closures. In 2017, 136 funds shut down or delisted, which ultimately is a sign of health in a corner of the investment industry that is still rapidly expanding in terms of products and assets under management.

Interestingly, at least 20 of the funds that shut down this year were currency-hedged vehicles.

Flows Neared $500 Billion

However, ETF flows really blew away previous records. Flows into exchange-traded funds were going full blast throughout the year and finished on a particularly strong note. A whopping $51 billion in new money came into U.S.-listed ETFs during December, pushing inflows for the year to $476.1 billion. Total assets now top $3.4 trillion.

The data, which comes from FactSet, includes flows for every trading day of 2017. The $476.1 billion figure was far and away a record for annual inflows, blowing past the previous all-time high from last year of $287.5 billion.

US Equity ETFs Led Flows Pack

U.S. equities were the most popular asset class among ETF investors during December. The segment collected $180.2 billion in fresh money during the year, thanks to steady gains in the stock market―the S&P 500 ended the year up by 21.8%―with record low volatility. The passage of the Republican tax bill in December raised hopes the rally could continue in 2018.

The top asset gainer of the year was the iShares Core S&P 500 ETF (IVV), which had inflows of $30.2 billion, bringing its total assets under management to $142.2 billion. IVV is the second ETF in history to surpass the $100 billion AUM mark.

The Vanguard S&P 500 ETF (VOO) and the SPDR S&P 500 ETF Trust (SPY) were the only two other U.S. equity ETFs to make the top 10 inflows list for the year.

Looking Abroad
International equities pulled in $161.6 billion, making it the second-most-popular asset class among ETF investors. In many cases, international equities performed better than their U.S. counterparts.

For example, the iShares Core MSCI Emerging Markets ETF (IEMG) and the Vanguard FTSE Emerging Markets ETF (VWO) both increased by more than 30%. They were also popular among investors, with 2017 inflows of $16.6 billion and $9.3 billion, respectively.

But it was the iShares Core MSCI EAFE ETF (IEFA) that led the inflows for international equities, with creations of $20.9 billion.

Also Of Note

Other funds on the top inflows list include two fixed-income ETFs. The iShares Core U.S. Aggregate Bond ETF (AGG) and the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) were in the Nos. 7 and 8 spots, taking in $11 billion each.

Meanwhile, the VanEck Vectors Gold Miners ETF (GDX), the WisdomTree Europe Hedged Equity Fund (HEDJ) and the Xtrackers MSCI EAFE Hedged Equity ETF (DBEF) led the outflows for the year, losing between $1.8 billion and $3 billion apiece.

For a full list of the top inflows and outflows for the year, see the tables below:

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , ETFs , Investing Ideas

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