Abu Dhabi, UAESaturday 7 December 2019

Assets in exchange traded funds jump to record $6 trillion globally

Use of ETFs in the Middle East remains lower than in Europe and Asia, consultancy says

Global ETF assets are poised to more than double to $12 trillion by the end of 2023, according to BlackRock. AP
Global ETF assets are poised to more than double to $12 trillion by the end of 2023, according to BlackRock. AP

Total assets in exchange traded funds jumped to a record $6 trillion (Dh22.03tn) globally by the end of October, doubling in size in less than four years, driven by a bull market in the US, independent research and consultancy firm ETFGI found.

Global ETF asset growth as of October 31 surpassed the $2.89bn levels of 2015, according to London-based ETFGI. The massive growth of the ETF industry is raising regulator concerns over their widespread use across financial markets worldwide.

"Regulators are concerned if regulations are fit for purpose given the growth in assets and types of ETFs," Deborah Fuhr, managing partner and founder of ETFGI, told The National. "They are monitoring the situation."

The global ETF industry has 6,919 ETFs with 14,326 listings and assets worth $6tn from 400 providers on 68 exchanges in 57 countries as of October 2019. An ETF is a type of investment fund that can be traded quickly and easily, similar to stocks and shares. They come with no upfront costs apart from the brokerage's dealing charges and annual fees, which are far lower than traditional mutual investment funds. There is no fund manager deciding which stocks and other assets to invest in; instead they passively track their chosen index, country, region or commodity, regardless of whether it goes up or down.

"ETFs reached $6tn as they are a very useful financial product - simple, cost efficient, transparent, with low minimum investment size," Ms Fuhr said. "Listed and traded on exchanges like a share in the US, ETFs are more tax efficient than mutual funds … Initially an index product — which is still the majority of the assets — ETFs are used by many investors that find it hard to locate active funds that consistently deliver alpha."

The use of ETFs in the Middle East is still "much lower" than in Europe and Asia, she added.

Global ETF assets are poised to more than double to $12tn by the end of 2023 and may reach $25tn by the end of 2027, BlackRock said in a May 2018 report.

"Lower-cost, diversified ETFs will increasingly be used by self-directed retail investors and sophisticated institutions alike as core broad market exposures," BlackRock said.

The five largest ETF providers are BlackRock’s iShares, Vanguard, State Street Global Advisers, Deutsche Bank X-trackers and Invesco PowerShares.

While the best-known ETFs track major indices such as MSCI World, the S&P 500 and FTSE 100, it is possible to invest in specific countries or regions, large, medium or small companies, government bonds, gold, crude oil, cocoa, water, carbon, cattle, corn futures, currency shifts or even a stock market crash.

Updated: December 2, 2019 07:06 PM

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