MANAMA: Global assets invested in ETFs at the end of 2009 were over $1 trillion, according to a report released on Monday.
Gobal Exchange Traded Funds (ETFs) assets hit an all-time high of $1 trillion at the end of December 2009, 45.2 percent above $710.9 billion at end of 2008, according to the latest figures from BlackRock titled Landscape Year End 2009 preview report.
The global ETF industry had 1,939 ETFs with 3,775 listings, and assets of $1,032 billion from 109 providers on 40 exchanges around the world at the end of December 2009. Year-to-date (YTD) assets have risen by 45.2 percent, which is more than a 27 percent rise in the MSCI World Index in dollar terms.
The challenging market conditions of 2008 caused a significant shift in investors' risk appetite in their evaluation of counterparty risk and their desire for liquidity. During 2009 many investors found that ETFs met their desire for greater transparency in relation to the issues of cost, transparency of holdings, transparency of price, liquidity, product structure, risk and return as they relate to investment alternatives.
ETFs are index-based open-ended funds that can be bought and sold as quickly and easily as ordinary shares on a stock exchange -- they have become popular and widely used investment vehicles to achieve many investment strategies include to gain diversified exposure to a market; for core/satellite investing; for buy and hold investing; for active traders who wish to take advantage of market movements; for investors wishing to hedge the market and as an alternative to futures and other institutional investment tools.
All financial investments involve an element of risk. Therefore, the value of an investment in ETFs and the income from it will vary and the initial investment amount cannot be guaranteed.
"In a world where investment products come and go with the blink of an eye, ETFs might be considered one of the most innovative financial products in the last two decades," the report added.
They have fundamentally changed how both institutional and retail investors construct their investment portfolios.
ETF providers have continued to expand their product ranges in more specialized areas to cater for the growing number of professional and retail investors using ETFs as advanced portfolio construction tools. The increasing availability of these highly-specialized ETFs across the full spectrum of equities, fixed income and alternative investments now ensures that investors can use ETFs to instantly reallocate capital to take advantage of new investment opportunities.
Over the past decade the compound annual growth rate for ETF assets globally was 56.3 percent, it was 58.1 percent in the United States, 53.1 percent in Canada and 90.5 percent in Europe, and there are no signs that investor interest in ETFs is fading. Investors are finding that ETFs are products that work well in every market environment," said Deborah Fuhr, Global Head of ETF Research & Implementation Strategy at BlackRock.
Capital flows this year within ETFs also demonstrate how these innovative investment products have become important bellwethers to gauge shifts in investor sentiment between asset classes. During the year, fixed income, equity and commodity-based ETFs enjoyed heavy inflows as some investors adjusted their risk profiles. In the beginning of the year given rising levels of risk aversion, ETFs tracking equity markets perceived as higher risk suffered much of the capital outflow, notably Asian and global (excluding US) equities.
After the markets turned in March, and kept rising through year-end, investments moved back into areas that had been shunned for the preceding year and a half. The changes in investor sentiment are shown in the net new asset data into ETFs tracking corporate bond, inflation, aggregate indices, international and emerging market indices and commodities.