Exchange-Traded Funds Are On A Roll

Exchange-Traded Funds Are On A Roll
Reda Farran, CFA

9 months ago1 min

What’s going on here?

ETFs (exchange-traded funds) are on a roll, hitting record-high investment levels.

What does this mean?

ETFs have been having a bit of a glow up lately, with an increasing number of investors treating the funds as portfolio-building blocks. Case in point: there’s been more money poured into the global ETF market than taken out every month for four years straight. Rallying stock markets are pumping up the funds too, increasing the value of the assets invested in ETFs and luring more investors in with the promise of tidy returns. That combination has helped ETFs smash records, globally and across individual markets. In fact, data from consultancy ETFGI shows that the amount of money invested in ETFs globally hit a new high note of $10.32 trillion last week, breaking the $10.26 trillion record set at the end of 2021.

ETFs hit record high

Why should I care?

Zooming in: Watch this space.

Plenty of analysts think the ETF industry’s set to keep on growing, and they could be right. See, the rise of actively managed ETFs – which work like stock-picking mutual funds – could help the industry grow beyond its traditional index-tracking roots. And that’s not to mention the red-hot popularity of thematic ETFs, which invest in long-term trends, as well as ones focusing on environmental, social, and corporate governance (ESG) factors.

The bigger picture: The feeling’s not mutual.

ETFs are outpacing other fund structures too. Investors poured $609 billion more into US-listed ETFs than they took out last year, while they yanked a record $1.1 trillion out of US-based mutual funds. That makes sense: unlike mutual funds, ETFs trade on a stock exchange, are more tax-efficient in the US, and are typically cheaper and a whole lot more transparent too.

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