ETFs saw record inflows in 2021

Stephen Lamb [00:00:00] Welcome to By The Numbers, I’m your host, Steve Lamb. Today, we’ll have the first of a two-part look at ETF growth. 2021 continued the dramatic rise of ETFs investment and as our own investments reporter noted, if you wanted to sum up the year, you could use three little letters to do so. And that’s right, it’s e t an f. Last year, $910 billion of net inflows entered the ETF space. This nearly doubled the already record amount of five hundred and four billion of inflows from 2020. Categorically, 2021 saw a great increase in the percentage of investments going to equity strategies with six hundred and ninety two billion, which is more than triple the equity investments of 2020. Fixed income overall remained relatively stable at 207 billion, compared with 206 from 2020. 

Devin McGinley [00:00:55] This can be attributed to a confluence of factors, according to Todd Rosenbluth, director of mutual fund and ETF research at CFR Ready, including broad based demand and greater usage by financial advisors. 

Todd Rosenbluth [00:01:06] The record ETF inflows, some of that is money that’s coming out of mutual funds as investors are gravitating towards the more tax efficient and often better performing structure of an ETF over an actively managed mutual fund. But we’re also seeing advisors and investors embrace the ETF structure in ways they haven’t been beforehand in a way to target their portfolio. 

Devin McGinley [00:01:28] One other element that is attracting investors to ETFs is the creative and targeted approach many new funds are taking. In fact, in 2021, there were at least 439 new ETF launches compared to 304 in 2020 and only 206 in 2019. Traditionally, ETFs have been focused on low cost index strategies, but this last year saw a rise in niche markets and actively managed funds. Some examples of these narrowly focused funds are the Global Solar ETF and the Global X Wind Energy ETF, both of which were launched in September. Fidelity’s Women’s Leadership ETF, which launched in June, and First Trust TCW Emerging Markets Debt ETF, which launched in February. 

Stephen Lamb [00:02:08] The range and creativity shown in the ETF space was certainly impressive in 2021 and only serve to whet the appetite of investors. Stay tuned next week where we look at how mutual fund companies are responding to the ETF wave. This episode was adapted in part from articles written by Jeff Benjamin. Thanks for watching. See you next week!