iShares Leads Global ETF Industry with Record Inflows of $140bn
Growth in 2016 powered by moves into bond, Core and smart beta ETFs
BlackRock’s outlook for ETFs and Index Investing in 2017
NEW YORK--(BUSINESS WIRE)-- BlackRock, Inc.’s (NYSE:BLK) iShares business led the global ETF industry in 2016, winning a record $140bn in new flows, powered by moves into bond, Core and smart beta ETFs. Representing 13% organic growth, iShares 2016 flows reflect the global scale, diverse product range and continued innovation of the iShares business.
Overall, the global ETF industry saw net inflows of $375bn in 20161, surpassing the previous year’s total of $348bn2.
Records posted across the board2:
- A new growth record set in the U.S. with net inflows of $107bn (2015: $97bn) and market leading $32bn of net inflows in Europe. iShares was the market share leader in both regions (US: 38%, Europe 61%). Asia Pacific clients also set a record for iShares ETFs bought this year, adding over $10bn3.
- iShares bond ETFs gathered a record $60bn, capturing 52% of all net inflows into bond ETFs globally. U.S. listed AGG saw the greatest net inflows of any bond ETF with $11.2bn. iShares bond ETFs attracted record net inflows in the U.S. ($38bn) and Europe ($21bn).
- Demand for iShares global smart beta ETFs surged to record highs, with $20bn of net inflows. iShares was number one in smart beta market share globally (37%), led by $9bn of net inflows into minimum volatility ETFs, with USMV seeing net inflows of $4.2bn.
- iShares Core ETFs added a record $67bn in global net inflows, led by IVV ($13bn) and AGG ($11.2bn). BlackRock re-priced its U.S. iShares Core ETFs in October and since then investors have adopted iShares Core ETFs faster than expected, adding $27bn.
- Institutional investors looking for simpler, less costly alternatives to derivatives switched around $10bn to iShares ETFs from futures or swaps positions.
Mark Wiedman, Global Head of iShares and Index Investments at BlackRock, said:
"iShares ETFs are helping investors of all sizes build more efficient and precise portfolios. In a year marked by unprecedented political change and periods of significant market uncertainty, investors turned to ETFs in record numbers to express market views, seek outperformance and invest for the long term.”
“We believe we are still in the early stages of a historic shift to ETFs and indexing more broadly. We believe trillions of dollars will move over the next few years as institutional adoption of ETFs and the move to fee-based advice in the retail sector both gather momentum. Investors continue to embrace the efficiency, quality, and value of indexing to execute long or short term investment ideas.”
BlackRock’s outlook for ETFs and Index Investing in 2017:
1. Active versus passive will be replaced by active and passive. As investors demand both value and premium service from their financial advisors and investment managers, investors will increasingly build active portfolios by using ETFs and index funds alongside high conviction alpha strategies.
2. Wealth managers will continue to move from product selection to portfolio construction. As the move towards fee-based financial advice picks up pace, wealth advisors will replace costly index-hugging active managers with lower-cost index exposures for the core of client portfolios.
3. Bond ETFs will continue to lead the way to bond market modernization. Bond ETF adoption will ramp up as the market infrastructure deepens and advisers turn to low cost, scalable ETFs in an increasingly fee-based environment. The bond ETF will continue to re-shape the way buyers and sellers trade bond risk, and play an instrumental role as investors seek to navigate a rising rate environment and generate income in portfolios.
4. Investors will move to factor-based ETF strategies that seek to capture underlying drivers of returns. Within smart beta, multifactor and single factor ETFs will be a major driver of growth - alongside minimum volatility strategies - as retail and institutional investors seek to combine the potential for outperformance with low cost in the centre of their portfolios. Smart beta innovation will also likely be seen within fixed income.
5. Institutions will increasingly turn to ETFs as replacements, or reference assets, for derivatives products. As banks’ balance sheet costs continue to increase, so too has the cost of using futures and swaps. ETFs now typically represent not only the more cost efficient option, but can also offer greater operational simplicity and more precise exposures.
Martin Small, Head of U.S. iShares at BlackRock, said: “A new era is dawning for advisors and long-term investors. While the future of the DOL fiduciary rule is uncertain, the movement toward fee-based strategies in the retail market is an unstoppable force. Asset and wealth managers are tapping into the ETF movement to reduce the cost and complexity of building great portfolios."
Rachel Lord, Head of EMEA iShares and Index Investments at BlackRock, said: “ETFs are playing a crucial role in the evolution of the financial industry in Europe. Investors are turning to ETFs for both strategic investments and tactical allocations in their portfolios. These products will continue to be the often unseen engine behind financial solutions that are helping people across the continent invest their savings and meet long-term goals on behalf of clients.”
Susan Chan, Head of Asia Pacific iShares at BlackRock, added: “All types of investors across the Asia Pacific region increased usage of iShares ETFs in 2016, resulting in a record year of inflows. Adoption of fixed income ETFs in the region far outstripped any previous years, reflecting ETFs’ ready convenience as allocation tools in response to macro events, and the increasing usage of ETFs in portfolio construction. Both trends highlight our regional clients’ increasing sophistication in ETF usage.”
Nicolas Gomez, Head of Latin America & Iberia iShares at BlackRock, added: “Latin American clients continued to turn to our global product lines for liquidity and access to international markets.”
“The evolution of the ETF industry in is in different stages across the various segments of the Latin American market, with pension funds being the biggest users and the rest of the market following their lead. Banks, asset managers, insurance companies, wealth managers and individual investors are rapidly increasing their exposure to international markets via ETFs due to their convenience, cost-efficiency and transparency and their need to diversify their portfolios,” added Gomez.
iShares global AUM was $1.3 trillion as of December 31, 2016.
BlackRock is a global leader in investment management, risk management and advisory services for institutional and retail clients. At September 30, 2016, BlackRock’s AUM was $5.1 trillion. BlackRock helps clients around the world meet their goals and overcome challenges with a range of products that include separate accounts, mutual funds, iShares® (exchange-traded funds), and other pooled investment vehicles. BlackRock also offers risk management, advisory and enterprise investment system services to a broad base of institutional investors through BlackRock Solutions®. As of September 30, 2016, the firm had approximately 13,000 employees in more than 30 countries and a major presence in global markets, including North and South America, Europe, Asia, Australia and the Middle East and Africa. For additional information, please visit the Company’s website at www.blackrock.com | Twitter: @blackrock_news | Blog: www.blackrockblog.com | LinkedIn: www.linkedin.com/company/blackrock
iShares® is a global leader in exchange-traded funds (ETFs), with more than a decade of expertise and commitment to individual and institutional investors of all sizes. With over 700 funds globally across multiple asset classes and strategies and more than $1 trillion in assets under management as of September 30, 2016, iShares helps clients around the world build the core of their portfolios, meet specific investment goals and implement market views. iShares funds are powered by the expert portfolio and risk management of BlackRock, trusted to manage more money than any other investment firm4.
1 Based on BlackRock analysis of Markit and Bloomberg data,
2 Based on BlackRock analysis of Markit and Bloomberg data, 12/30/16
3 Based on BlackRock analysis of APAC client iShares inflow as of 11/30/16
4 Based on $5.117 trillion in AUM as of 9/30/16
Carefully consider the Funds' investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds' prospectuses or, if available, the summary prospectuses which may be obtained by visiting www.iShares.com or www.blackrock.com. Read the prospectus carefully before investing.
Investing involves risk, including possible loss of principal.
Fixed income risks include interest-rate and credit risk. Typically, when interest rates rise, there is a corresponding decline in bond values. Credit risk refers to the possibility that the bond issuer will not be able to make principal and interest payments.
There can be no assurance that performance will be enhanced or risk will be reduced for funds that seek to provide exposure to certain quantitative investment characteristics ("factors"). Exposure to such investment factors may detract from performance in some market environments, perhaps for extended periods. In such circumstances, a fund may seek to maintain exposure to the targeted investment factors and not adjust to target different factors, which could result in losses. The iShares Minimum Volatility ETFs may experience more than minimum volatility as there is no guarantee that the underlying index's strategy of seeking to lower volatility will be successful.
This material represents an assessment of the market environment as of the date indicated; is subject to change; and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any issuer or security in particular.
Buying and selling shares of ETFs will result in brokerage commissions. There can be no assurance that an active trading market for shares of an ETF will develop or be maintained.
Diversification and asset allocation may not protect against market risk or loss of principal.
The iShares Funds that are registered with the US Securities and Exchange Commission under the Investment Company Act of 1940 are distributed in the US by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).
©2016 BlackRock, Inc. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock, Inc., or its subsidiaries. All other marks are the property of their respective owners. iS-19922-0117
Source: BlackRock, Inc.