Tremendous growth in ETF markets

Townsend Lansing from ETF Securities says there has been tremendous growth across the ETF market over the past few years, with a lot of interest across all asset classes.

The value of investments can fall as well as rise, and you may get back less than you invested. Past performance is no guarantee of future results

How much did the ETF market grow in 2016?

36 billion dollars were invested in ETFs worldwide in 2016, representing substantial growth for the market. Here’s how investors used that capital:

  • Equities were the most popular ETF asset class
  • Oil led the way for commodity-based ETFs
  • The euro and dollar were the currency-based ETF frontrunners

And despite a slow start to 2016 for fixed-income ETFs, short-duration markets began to take off at the end of the year. 

Overall there are expectations for further strong growth, as investors begin to favour ETFs over actively managed mutual funds and other similar products. 

Where are those ETF investors coming from?

The US still dominates the ETF market, being about five or ten years ahead of Europe in terms of investor numbers. Asia is considered the biggest growth area, but is still in its infancy as an ETF investor market. Regulators and exchanges are looking at ways to start more ETF flows there, but it’s still very early days. 

Why is the ETF market growing like this?

The transparency and simplicity of ETFs contribute immensely to their popularity. They represent a move away from the more traditional investment world, where you might buy into a managed fund that you have little control over. 

By contrast ETFs are traded on exchanges like individual shares, and their performance is therefore transparent and easily monitored. They can also offer access to a wide variety of underlying markets as a mutual fund would, but with just a single trade. 

Where can I learn more about ETFs?

With the popularity of ETFs giving rise to a tranche of new investors, it’s up to ETF providers – IG among them – to provide education about the product. Take a look at our ‘What is an ETF?’ page to learn more. 

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