Capital Is Pumping Into ETFs - Dealbreaker

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No one likes passive-aggressive behavior. Except for most investors in 2020.

Net inflows into exchange-traded funds, many of which are passively managed, have jumped 40% so far this year.

Exchange-Traded Bonanza
Welcome to the land of many commas.

Through the first nine months of the year, investors have plowed $488 billion into ETFs compared with $349 billion during the same period in 2019, according to data provider ETFGI.

  • Leading the pack is Vanguard with a haul of $134 billion, up 73% vs. the same period in 2019.
  • BlackRock, the world’s largest asset manager, added a modest $106 billion to its iShares ETF war chest.
  • State Street nearly tripled net inflows to $21 billion as investors sought refuge in its physically-backed gold ETFs.

Why It Matters
The wave of investor interest in low-cost, index-tracking vehicles has been steadily climbing since the financial crisis.

Winners Are Winning: BlackRock, sometimes called the "Amazon of investing," reported blockbuster earnings yesterday: total assets under management swelled to a record $7.8 trillion, revenue climbed 18%, and operating margin reached a hefty 47% (another record).

Battle For Scale: Traditional "active" managers are bulking up to better compete in an increasingly passive world. Last week Morgan Stanley agreed to acquire Eaton Vance for $7 billion and earlier this year Franklin Templeton paid $6.5 billion to buy Legg Mason.

Innovation Nation: Last year, regulators simplified and streamlined the approval process for new ETFs. That has caused an explosion of over 200 new ETFs in 2020, already the most in 5 years. Amidst the banner year, Invesco announced yesterday it is introducing four new ETFs to the popular "QQQ" family of ETFs.

The Takeaway: Speaking on CNBC yesterday, Blackrock CEO Larry Fink said he believes there could be more upside in the market. He added, "we have a strong conviction that the average investor still is under-invested.” Perhaps not a surprising opinion from his perspective.

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