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Global ETFs' AUM Rises to $5.1 Trillion in July: What's Hot?

Sweta Killa
Jones Lang LaSalle (JLL) witnesses robust increase in revenues from the LaSalle Investment Management segment during the Jul-Sep quarter. However, assets under management decline sequentially.

Amid both peaks and troughs, the ETF industry is seeing explosive growth thanks to its unique strategies, creativity, transparency, diversification benefits, enhanced tax competences, low turnover and of course low cost. Additionally, the novel concept that issuers are bringing in to the ETFs is attracting investors.

That said, the industry has reached to new high of $5.12 trillion in AUM. As per ETFGI, global ETFs have gathered around $41.13 billion in assets in July -- the largest monthly net inflows since January. About $27.37 billion of the total inflows came from equity ETFs, followed by $12.98 billion inflows in fixed income. Globally, the industry has 7,487 products with AUM from 375 providers listed on 70 exchanges in 57 countries at the end of July.

The growth was mainly driven by a rise in the stock market amid concerns over trade war fears and geopolitical tension. Notably, the plain vanilla and low-cost ETFs have been the biggest crowd pullers (read: Guide to the 25 Cheapest ETFs).

Below, we have highlighted last month’s top five asset gatherers:

SPDR S&P 500 ETF Trust SPY

This is a plain vanilla $272.2-billion ETF tracking the S&P 500 Index and has attracted $6.5 billion in its asset base buoyed by strong earnings and bouts of upbeat data that fueled optimism in the U.S. economy, offsetting concerns over global trade. Additionally, the fund has a lower expense ratio of 0.09% (read: S&P 500 to Set New Records: Ride High With These ETFs).

JPMorgan BetaBuilders Japan ETF BBJP

This ETF has pulled in about $1.7 billion in capital, taking its total AUM to $1.8 billion. This is the newly debuted fund in the space providing exposure to the broad Japanese equity market using a "passive" investment approach. The biggest growth came on the back of the ongoing price war, which has been the hottest theme in the ETF industry and issuers are rushing to cut fees in order to garner a larger slice of the fast-growing market. The BetaBuilders brand comes with a low expense ratio of 0.19% -- 30 bps lower than the ultra-popular iShares MSCI Japan ETF EWJ (read: New JPMorgan Japan ETF Tops $1B in AUM).

Vanguard Value ETF VTV

This $42.4 billion ETF having an expense ratio of 0.05% saw inflows of $1.5 billion. Heightened volatility and uncertainty drove investors to value investing. This is because value stocks seek to capitalize on inefficiencies in the market and have the potential to deliver higher returns with lower volatility compared with growth and blend counterparts. These have strong fundamentals — earnings, dividends, book value and cash flow — that trade below their intrinsic value and are undervalued by the market. Additionally, value stocks are less susceptible to trending markets and their dividend payments offer safety in times of market turbulence (read: Value ETFs Regain Momentum: Will This Last?).

iShares iBoxx USD High Yield Corporate Bond ETF HYG

This fund accumulated $1.5 billion in July on investors’ fear over trade tensions between the United States and China. Bonds generally act as safe haven investments in times of turmoil. And coupled with a rising rate scenario and an improving economy, high-yield corporate bonds are in vogue. An improving U.S. economy will continue to keep default rates at lower levels and tighten spreads, making junk bonds attractive. Further, these bonds provide cushion against rising interest rates as these are generally less sensitive to interest rate fluctuations, while offering outsized yields (read: ETF Asset Report of July).

Though this is not the lowest cost choice in either of the corporate bond or high yield space, charging 49 bps in annual fees, HYG is the plain vanilla ultra-popular ETF with AUM of $15.5 billion.

iShares Core MSCI Emerging Markets ETF IEMG

IEMG gathered around $1.4 billion in AUM last month mainly driven by its low expense ratio of 0.14%. A subdued dollar and cheap valuation led to a rebound in emerging market ETFs, which were hit hard in the second quarter by dollar strength and expectation of faster-than-expected rates hikes (read: EM ETFs Rebound in July: Value Trap or Value Play?).

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