ETFs Race to Fastest Yearly Start Ever Based on Inflows, BlackRock Data Show

By Asjylyn Loder 

Investors poured $62.9 billion into exchange-traded funds in February, pushing the year-to-date world-wide tally to $124 billion, the fastest start of any year in the history of the ETF industry, according to data from BlackRock Inc.

U.S. ETFs accounted for $44 billion of that, pushing assets in U.S. funds to almost $2.8 trillion.

Most of the money went to cheap, index-tracking ETFs, a sign that the price war in ETFs isn't over yet. BlackRock's iShares ETFs were the biggest winner, and its low-cost Core series garnered the bulk of the $38 billion global haul.

"All of the money is going into the cheapest and most boring ETFs. This is the retail investor getting back into the market with a vengeance," said Dave Nadig, chief executive of ETF.com, an industry website owned by Bats Global Markets, newly a subsidiary of CBOE Holdings Inc.

The fastest-growing ETF so far this year is the iShares Core Emerging Markets ETF, which took in $4.2 billion in the first two months of the year, 18% of its assets, according to FactSet. Three other Core ETFs that invest in U.S. stocks were also among the top gainers last month.

Investment advisers are increasingly focused on low-cost investments amid an industrywide shift to fee-based financial advice, where advisers are paid by clients instead of commissions on fund sales. BlackRock cut fees on its Core funds in October. The shift has put pressure on asset managers to cut fees, and has cut into their bottom line.

"The proliferation of passive management continued to pressure both flows and effective fee rates, offsetting the positive impact of higher markets," according to a Moody's Investors Service report on Tuesday.

Asset managers need to gather more assets to offset the impact of lower fees, something BlackRock has successfully done. Assets in BlackRock ETFs surpassed $1 trillion in January.

"You can still grow revenue organically," said Martin Small, head of U.S. iShares. "You just need to gather assets."

Write to Asjylyn Loder at [e-mail]

(END) Dow Jones Newswires

March 02, 2017 19:19 ET (00:19 GMT)

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