The iShares Core S&P 500 UCITS ETF (LON: CSPX) has become the first Europe-listed ETF to surpass $20bn in assets under management (AUM) as bullish US equity markets and strong fund net inflows tipped the ETF past the threshold.
The two largest ETFs in the US also track the S&P 500 Index, including the SPDR S&P 500 ETF Trust (NYSE: SPY) which holds $228bn in AUM; and the iShares Core S&P 500 ETF (NYSE: IVV) which holds $95bn in AUM.
According to iShares, US equity ETFs listed globally have enjoyed bumper inflows in recent months, amassing $19.3bn in net new assets in January 2017 alone, driven by a renewed appetite for risk amidst a pickup in the pace of the macroeconomic recovery.
Contributing strongly to the record fund AUM, the underlying S&P 500 Index has benefited from bullish US sentiment, rising 26.0% over the past year. Some of the index’s largest constituents have been instrumental in driving fund performance, such as fourth largest holding Amazon, which is up 62.7% over this period.
The pace of the US bull market has even gathered pace over the past few months on the back of Donald Trump’s victory in the US Presidential Election. Despite investors being initially skittish about US equities directly after Trump’s win in November, the President’s ongoing pledge to cut taxes and regulation, and negotiate more favourable trade deals for the US, has led to a boost in earnings estimates for US large-cap corporations. The S&P 500 Index is up 8.6% between 8 November 2016 and 15 February 2017
iShares also noted the milestone was achieved owing to the general trend towards passive investing and the revolutionary growth of the ETF industry, as lower costs and greater transparency continue to fuel investor interest in ETFs as portfolio construction tools.
Joe Parkin, Head of iShares UK retail and wealth sales, commented: “What we hear from our clients is that ETFs allow them to deliver better outcomes within their portfolios, because of the precision, transparency and cost effectiveness that they offer. They have become more ingrained as a tool to express investment views tactically and over the long term, and are being used extensively across asset classes and geographies.
“We believe [European] ETFs have the potential to surpass $1tn in assets by 2020 driven by the regulatory drive towards fee-based advice, the growth of digital investment, and investor thirst for a varied investment toolkit that allows them to efficiently navigate an increasingly complex world.”
As of the end of January, the European ETF industry held just shy of $600bn in AUM.
The iShares Core S&P 500 UCITS ETF is physically backed and has a total expense ratio (TER) of 0.07%. The fund has several listings across Europe including on the London Stock Exchange, in US dollars or British pounds; on the Borsa Italiana, Deutsche Boerse and Euronext Amsterdam, in euros; and on the Swiss Exchange, in US dollars.
While the fund’s achievement is a landmark for the European ETF industry, the US ETF market is considerably more developed with 27 ETFs currently boasting over $20bn in AUM. Interestingly the two US-listed ETFs with the highest assets also track the S&P 500 Index and include the SPDR S&P 500 ETF Trust (NYSE: SPY) which holds $228bn in AUM and has a TER of 0.09%, and the iShares Core S&P 500 ETF (NYSE: IVV) which holds $95bn in AUM and has a TER of just 0.04%.