Driven by strong demand for the firm’s bond and core range of exchange-traded funds, iShares has reported a record gathering of $140bn in net new assets during 2016, representing 37.3% of a total $375bn in global ETF net inflows for the year.
Mark Wiedman, Global Head of iShares and Index Investments at BlackRock.
The firm was the market leader in capturing new ETF assets in both the United States ($107bn in net inflows representing 38% market share) and in Europe ($32bn in net inflows representing 61% market share), while it also added over $10bn in new client money within the Asia Pacific region.
The strong net inflows represent 13% organic growth for the global iShares’ product range during the year.
The iShares’ range of core ETFs – low cost, diversified funds designed to act as foundational building blocks for portfolio construction – were most in demand, adding a record $67bn in global net inflows. The pace of new money flowing into the suite gathered momentum after fees were reduced in October; $27bn of net inflows was recorded during the remainder of the year.
The iShares’ suite of bond ETFs was also a strong performer, gathering a record $60bn and capturing 52% of all net inflows into bond ETFs globally. The funds attracted record net inflows in the US ($38bn) and Europe ($21bn).
According to iShares, bond ETF adoption is likely to gather more momentum in coming years as the market infrastructure deepens and advisers turn to low cost, scalable ETFs in an increasingly fee-based environment. The funds continue to re-shape the way buyers and sellers trade bond risk, and will play an instrumental role as investors seek to generate income and navigate rising interest rates.
Also contributing to the firm’s strong inflows, iShares’ global smart beta ETF suite recorded $20bn in net new assets through 2016, led by $9bn of net inflows into minimum volatility ETFs as investors sought new means to deal with stressed market conditions during the year.
Mark Wiedman, Global Head of iShares and Index Investments at BlackRock, commented: “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.”
iShares believes more investors are likely to turn to smart beta to capture underlying drivers of returns, noting that future growth in the segment is likely to come from multifactor strategies and bond-based offerings.
Looking forward, iShares notes that further organic growth in the ETF industry will be driven by the trend towards fee-based financial advice as wealth advisors will replace costly index-hugging active managers with lower-cost index exposures for the core of client portfolios.
Wiedman said: “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.”
Rachel Lord, Head of EMEA iShares and Index Investments at BlackRock, added: “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.”