ETF Industry Withstands Market Decline

ETF Industry Withstands Market Decline

Despite a harsh bear trend slamming global financial markets throughout 2022, more than 400 new ETFs emerged on the market over the last year attracting $867 bn in net inflows into the ETF industry. This is the second largest record after 459 new launches pulled $1.29tn in 2021, according to Black Rock data shared with the Financial Times.

Although most of the funds of the $6.5 trillion industry saw sharp drawdowns as equities and fixed-income securities declined, several sectors showed some asset classes that stepped up their highest-ever inflows. Government bond ETFs saw net inflows of $181bn, more than in the three previous years combined, as Black Rock data reveals.

And while the total flows to equity ETFs dwindled to $598bn from $1tn in 2021, emerging market equities set a fresh record, pulling in $110bn. According to Financial Times, several sectors such as healthcare ($20bn) and utilities ($6bn) beat their top record inflows in 2022.

“The ETF vehicle gives investors control, and then the variety gives them precision,” Bryon Lake, global head of ETF Solutions at JPMorgan Asset Management, said last month.

Only the energy sector showed gains in 2022. Some of the best-performing ETFs belong to that category. The Energy Select Sector SPDR Fund (ticker XLE) added more than 57% during 2022, as did the Fidelity MSCI Energy Index ETF (FENY).

According to data from the Investment Company Institute, as of December 28, 2022, the mutual funds saw net outflows of $1.1 trillion in the US during 2022, whereas ETFs showed net inflows of $611bn bringing a gap between the older investment vehicles, and ETFs to $1.7 trillion.

“The mutual fund is now dying as an investment vehicle. The time of the ETF has arrived,” Nate Geraci, president of the ETF Store said to the Financial Times.

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