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Global ETFs hit record inflow of capital at $639 billion in H1 2021

Global ETFs hit record inflow of capital at $639 billion in H1 2021
Justinas
Baltrusaitis
3 months ago
4 mins read

The global exchange-traded funds (ETFs) continued to record more interest from investors in the first half of 2021. 

Data provided by financial markets data provider Refinitiv indicates that globally, investors pumped $639.8 billion in ETFs for the first six months of the year. The figure represents more than double compared to the first half of 2020. 

Equity ETFs attracted the largest interest at 76% or inflows of $490.65 billion, while bond ETFs had $136.6 billion in investment. Elsewhere, the United States recorded the biggest share of investments at $469.3 billion. European ETFs rank second at $106.8 billion, with Asian ETFs accounting for $38.3 billion. 

The record capital inflow was inspired by an environment of low-interest rates, equities rally, and more lending. Furthermore, the reopening of the economy due to the rollout of Covid-19 vaccines also inspired the influx of investments. 

Notably, ETFs became the investment of choice as people decided to put money accumulated amid the pandemic into use. 

Exchange-traded funds’ assets under management spikes in 12 months

During the same period, leading global ETFs recorded a surge in the value of Assets Under Management. According to our previous research, the value of assets under management (AUM) by the ten largest ETFs surged 47.56% between March 2020 and April 2021, from $1.14 trillion to $1.69 trillion. During the 12 months, the ETFs added $546.63 billion. 

Additionally, in five years between 2016 and 2020, the value of assets under management spiked by 56.22%, from $3.32 trillion to $7.99 trillion. Notably, 2021 recorded one of the highest growth rates. 

With the growing lucrative nature of ETFs, asset managers are also incorporating them to build portfolios. Notably, the leading fund management firms like BlackRock and Invesco are also venturing into ETFs, fuelling the growth in the first two quarters of 2021 despite inflation concerns. 

“Inflation has already reared its ugly head, and if the expectations for a massive economic rebound are fulfilled, then the risk is that the likes of the Fed, BoE, etc may have to intervene to cool things down a bit sooner than they’re currently signalling,” Zarate said Jose Garcia Zarate, an associate director at Morningstar.

ETFs deliver lucrative returns

Consequently, different ETFs have managed to deliver varied results over the recent months. For instance, our research shows that the top three best performing ETFs in the real estate sector recorded average returns of 45.69% between January 1, 2021, and June 2, 2021. 

The returns highlight the recovery of the real estate sector that was impacted during the coronavirus pandemic. Amid the health crisis, commercial and multi-dwelling landlords defaulted on bank loans since most tenants no longer had the income to pay their rents due to unemployment. 

In general, the ETF growth and returns are due to attractive tax efficiency, cost, liquidity, and transparency. Most investors shifted to ETFs after the coronavirus pandemic initially resulted in the general crash of the stock market

The traditional stock market is characterized by volatility and presented the perennial barrier of complex entry. However, ETFs allowed investors to get in and out quickly. ETFs liquidity also presented an attractive feature for the sector. 

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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.

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