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Ten largest ETFs market cap surges by 47%, adding $540 billion in 12 months

10 largest ETFs market cap surges by 47%, adding $540 billion in 12 months
Justinas
Baltrusaitis
Updated: 13 May, 2021
4 mins read

Exchange-traded funds (ETFs) are registering increased global interest, and the growth is evident based on the total value of their assets under management. 

Data acquired by Finbold indicates that the value of assets under management (AUM) by the ten largest ETFs has surged 47.56% between March 2020 and April 2021, from $1.14 trillion to $1.69 trillion. Therefore the ETFs added $546.63 billion in the last 12 months. 

SPDR ranks as the largest ETF, with AUM standing at $356.65 billion, a growth of 34.83% from last year’s figure of $264.51 billion. iShares Core ranks second with $277.58 billion in AUM, while in March last year, the value was $194.92 billion. 

Elsewhere, investors showed more interest in specific ETFs, with Invesco QQQ emerging as the biggest gainer at 86.95% to $164.03 billion in April 2021. Vanguard Total Stock Market ETF is the second biggest gainer at 81% to $239.55 billion. 

Why ETFs are surging in popularity 

The notable growth in assets under management reflects the rising popularity of ETFs driven by increasing interest from investors towards passive income sources alongside awareness about the market. Furthermore, the attractive tax efficiency, cost, liquidity, and transparency nature of ETFs has partly played a role in the popularity. 

The benefits of ETFs came into the spotlight in the past year when the coronavirus pandemic resulted in an initial crash of the stock market before the historic rebound. Amid the economic crisis, volatility in the markets spiked, and investors could quickly get in and out of ETFs while moving the risk. In this case, the liquidity of ETFs, unlike other fund structures, was an invaluable feature.

With ETF markets booming during the coronavirus pandemic, millennials have also been a key driver to the sector’s growth. The new generation of investors has explored the index funds to bet on market rallies and global trends.

In this case, young people who are not familiar with the operations of the financial markets are well-served by using a passive income management approach, and ETFs offer the solutions. ETFs also make it possible to build a diversified portfolio with relatively low investment amounts making it suitable for young people

Besides millennials, the sector’s growth has also been aided by retail investors who are occupied by other jobs but need to earn passively. The nature of the ETF market is perfect for investors with minimal time and unable to participate in trading on  a regular basis. 

Response to pandemic boosts ETF markets

Over the past year, the growth of the ETF market was also boosted by the massive stimulus packages by governments to help revive the financial markets amid the economic meltdown.

Governments have slashed interest rates and expanded bond-buying programs to stabilize financial markets in rolling out the stimulus plans. Notably, these measures have been aggressive in return encouraging investors to participate in the ETF market. 

Furthermore, for the United States, confidence was boosted by the Federal Reserve’s decision to use fixed-income ETFs to help strengthen the bond market. This was considered a vote of confidence in the sector from the bank.

Before the pandemic, the ETF market was still growing. However, some skeptical financial figures had predicted the market would crumble in case of a financial crisis. It could eventually see a severe contraction. The prediction of violent correction has been proven wrong based on the market’s rapid expansion in recent months. 

What are the exchange-traded funds (ETFs)?
ETFs are a form of security that tracks an index, sector, commodity alongside other assets and can be traded on the stock market like regular stocks. ETFs usually track individual commodities, a collection of securities, or even be tailored to monitor specified investment approaches.

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Justinas Baltrusaitis
Author

Justin crafts insightful data-driven stories on finance, banking, and digital assets. His reports were cited by many influential outlets globally like Forbes, Financial Times, CNBC, Bloomberg, Business Insider, Nasdaq.com, Investing.com, Reuters, among others.