Global ETF Market Expected to Reach $10 Trillion This Year
Domestic ETF Boom Continues with Diverse Product Launches
[Asia Economy Reporter Junho Hwang] Exchange-Traded Funds (ETFs) have entered a golden age. As global money moves concentrate on ETFs, it is expected that funds will flow up to $10 trillion (11,465 trillion KRW) within the year.
According to data from global research firm ETFGI as of the end of June, the worldwide net assets of ETFs totaled $9.109 trillion. This represents a 17.74% increase in just six months from $7.736 trillion at the end of last year.
If this trend continues, reaching $10 trillion within the year seems achievable. If growth reaches 29.26% this year, the $10 trillion milestone can be attained. Last year, the annual growth rate was 24.89%. The year with the highest growth since 2010 was 2017, with a 37.01% increase compared to the previous year.
By country, the majority of net assets are concentrated in the United States. The U.S. holds $6.3655 trillion in net assets, accounting for 69.9% of the total ETFs. The U.S. net assets grew by 19.8% over the past six months. Europe, with $1.3951 trillion (15.3%), grew by 16.9% during the same period.
By ETF type, equity ETFs hold the largest share. $7.0112 trillion (77%) is recorded as net assets. Over the past six months, $63.337 billion flowed in. Bond ETFs, which account for 16.8% of the total, attracted $18.323 billion. Active ETFs, such as ARK Innovation, famous for Tesla investments last year, saw inflows of $6.699 billion, making up about 4.4% of the total.
In South Korea, enthusiasm for ETF investment is gradually increasing. According to the Korea Financial Investment Association, as of the 28th of this month, ETF net assets reached 59.6387 trillion KRW, a 14.60% increase compared to the end of last year.
Kim Jeonghyun, Head of the ETF Management Center at Shinhan Asset Management, analyzed, "ETFs are products that list index funds on exchanges, allowing investors to trade them conveniently like stocks. They combine the advantages of stocks and funds while maximizing investment cost efficiency, gaining popularity."
As ETFs with diverse characteristics like a chameleon continue to be launched, a global money move toward ETFs is taking place.
First, breaking the traditional sector classification walls, more segmented products based on new classifications are emerging. Due to the recent electric vehicle boom, investors who wanted to invest in ETFs previously had to buy products investing in manufacturing or the automotive industry. Now, there are ETFs investing specifically in automobiles, electric vehicles, batteries (a key component of EVs), and even essential materials like lithium.
Products that satisfy asset allocation needs are also appearing. ETFs investing in assets with low correlation to traditional investment assets like stocks are being introduced. For example, ETFs related to cryptocurrencies, which have regained investor interest this year, or ETFs investing in 'memes' represent ETFs investing in various asset classes.
ETFs that can represent investors' investment objectives and intentions are also being launched. Investors can easily participate in ESG (Environmental, Social, Governance) or activism simply by purchasing ETFs.
Kim explained, "If you want to invest in the U.S. market, you can either invest directly or invest in U.S. funds or ETFs. Among these, investing in ETFs reduces risks associated with unfamiliar individual stocks and avoids difficulties in redemption like funds."
He added, "Due to these advantages, investors' ETF investments are rapidly expanding, and this trend is commonly observed in global investment markets."
The increased global interest in stock markets after COVID-19 is also cited as a reason for the ETF boom. Kim Dohyung, ETF Marketing Team Leader at Samsung Asset Management, said, "In a prolonged low-interest-rate environment, individual market participation exploded worldwide after the pandemic in countries like the U.S., China, and South Korea. The listing of many active ETFs and various theme ETFs reflecting trends is believed to have significantly increased funds."
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