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U.S. ETF Assets Hit $2 Trillion Milestone

Buoyed by strong inflows to equity and fixed income funds, the U.S. exchange traded products industry has hit another milestone, eclipsing $2 trillion in assets under management.

Industry observers likely saw this landmark moment when November inflows data revealed that investors had more money to U.S. ETFs and ETNs through the first 11 months of 2014 than in all of 2013.

“Through December 22nd, assets have increased 18% this year from $1.698 trillion to $2.007 trillion based on positive market performance and net new assets,” according London-based ETF research firm ETFGI.

With the S&P 500 and Dow Jones Industrial Average racing to record highs, investors have been pouring new capital into equity ETFs. As of Dec. 22, the SPDR S&P 500 ETF (SPY) , Vanguard 500 Index (VOO) and the iShares Core S&P 500 ETF (IVV) h ad added over $41.3 billion in new assets this year on a combined basis. [S&P Says Assets Linked to its Indices Reach $781B]

Other prolific asset gathers among equity-based ETFs include the Vanguard REIT ETF (VNQ) , which has benefited from low interest rates and investors’ ongoing demand for yield, and the WisdomTree Europe Hedged Equity Fund (HEDJ) .

Only eight ETFs have added more new assets than HEDJ this year. HEDJ has benefited from a perfect storm of dollar strength and rising speculation that the European Central Bank will soon unveil its own version of quantitative easing. The ETF’s asset growth has been jaw-dropping. WisdomTree said last week HEDJ topped $5 billion in AUM after crossing the $1 billion in assets mark in April. [Hedged Europe ETF Keeps Gaining Cash]

The rise of strategic beta ETFs has also played a significant role in boosting U.S. ETF assets. As of late August, assets under managements across smart beta ETFs totaled $350 billion, a 30% year-over-year increase. Much of that growth has been driven by institutional investors, including large money managers, endowments and pensions. The growth of these non-traditional ETFs has been exponential as smart beta ETFs accounted for just 19% of total industry assets at the end of last year.

Dividend ETFs, including popular names such as the iShares Select Dividend ETF (DVY) , Vanguard High Dividend Yield ETF (VYM) , SPDR S&P Dividend ETF (SDY) and the WisdomTree LargeCap Dividend Fund (DLN) , have contributed over $10 billion combined to the growth of smart beta ETFs and the industry at large.

It has also been a stellar year for bond ETF growth, a theme that was on display in October when bond ETFs added $17.7 billion in new assets. That topped the previous monthly record of $17 billion set in February. [Bond ETFs Dominate in October]

The iShares Core U.S. Aggregate Bond ETF (AGG) and the Vanguard Total Bond Market ETF (BND) are the top asset gatherers among bond ETFs this year with combined inflows of $15.2 billion.

“Year to date, the US listed ETF/ETP industry has gathered a record setting $232 billion in net new assets beating the prior full year record of $190 billion in 2013,” said ETFGI.

U.S. ETF & ETP Growth


Chart Courtesy: ETFGI

ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of DVY, IVV and SPY.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.