Global economy recovery is well on its path going by the money being put in the exchange traded funds, especially in the last quarter.
A trillion dollars has entered the traded funds over the past 12 months. Global investor inflows into ETFs reached $359.2bn in the first three months of 2021, according to the data provider ETFGI. The USD136.20 billion in net inflows gathered during March are the second-highest monthly inflows behind the prior record USD139.89 billion gathered during February 2021.
The past year has seen net global ETF inflows of just over $1tn. “We have never previously seen ETF inflows reach $1tn in a twelve-month period. More investors are using ETFs to put their money to work in equity markets as the increasing pace of coronavirus vaccination programs and continuing stimulus initiatives have led to a welcome improvement in the outlook for the global economy,” said Deborah Fuhr, the founder of ETFGI.
“The S&P 500 gained 4.4 percent in March and 6.2 percent in Q1, supported by the increasing pace of Covid-19 vaccinations and continued monetary and fiscal support,” said Fuhr. “Global equities gained 2.5 percent in March and 5.2 percent in Q1, as measured by the S&P Global BMI. Some 38 of the 50 countries advanced during the month and 35 were positive at the end of Q1. Developed markets ex-U.S. gained 2.3 percent in USD terms in March and 4.0 percent in Q1. Emerging markets were down 1.6 percent in USD terms in March and up 2.8 percent in Q1, as measured by the S&P Emerging BMI.”
Matthew Bartolini, head of Americas ETF research at State Street Global Advisors, said that the US stock market began a “risk-on hot streak” in November after the uncertainty surrounding the presidential election ended and a timeline for vaccinations was established. “The flows into ETFs so far in 2021 show that investors are putting serious money to work to partake in this risk-on rally,” said Bartolini.
Demand for value-orientated US equity ETF has surged with inflows reaching $25.5bn this year, while US small-cap ETFs have registered inflows of about $20bn. “These are strong signs of cyclical positioning by investors,” he added.
Fiscal stimulus and supportive central banks have created a positive environment and pushed confidence.
Net inflows into US and Canadian equity ETFs reached $143bn in the first quarter of 2021, up from $30.4bn in the same period last year. Global equity ETFs gathered $46.7bn, more than four times the inflows of $10.5bn registered in the first quarter of 2020. Asia-Pacific equity ETF flows almost doubled to $19.3bn from $9.9bn, according to ETFGI.
The two best performing ETFs have been BlackRock and Vanguard, the world’s top asset management firms. This has forced smaller competitors to go in for mergers and acquisitions to combat the big players stalling the small ones.
Vanguard attracted ETF inflows of $96.2bn in the first three months of 2021, up from $50bn in the first quarter of last year, w hick witnessed a slowdown due to the pandemic affecting sentiments. The maximum inflow for Vanguard, about $4.3 billion, has come from clients converting an existing mutual holding into an ETF.
BlackRock’s managed to rake in $71.4bn in the first quarter, compared with just $13.6bn registered in the first three months of 2020.
State Street, the third-largest ETF manager globally, gathered first-quarter inflows of $23.9bn. Invesco, JPMorgan, DWS, Amundi and UBS also registered strong ETF business growth in the first three months of this year.
Fiscal stimulus and supportive central banks have created a positive environment and pushed confidence up. The tidal wave of liquidity has resulted in fresh fears of unstable price bubbles.
But a Bank of America survey suggests that just 7 percent of US fund managers feel that there is a price bubble waiting to burst.
Vanguard said this month that the US stock market “may be overvalued, though not severely”. BlackRock is recommending that clients should “overweight” equities in the US, UK, Asia, excluding Japan and emerging markets.
