Data from exchange traded funds analytical platform TrackInsight shows the global ETF market finished 2020 at a record high of $7.6 trillion in assets, across 6,518 ETFs.
A combination of strong equity market performance coupled with accelerating investor inflows contributed to the new record.
Despite challenges created by COVID and market volatility, all regions of the world experienced double-digit ETF growth rates over 2020. Asia-Pacific was the fastest growing region with ETF assets rising by 28.7% to a new high of $689 billion, of which $69 billion was new flow into ETFs. Assets in European listed ETFs grew by 26.4%, reaching a new record of $1.3 trillion with $138 billion of new flow and the North American market grew 24.1% reaching an all-time high of $5.6 Trillion in AuM with $536 Billion of new flows.
Against this impressive backdrop, two areas of the ETF market stood out for trend-busting growth trajectories: Active and ESG.
Eighty billion dollars of new flows contributed to Active ETFs growing by 55% reaching a new high of $273.5 billion in assets under management. With nearly 200 new active ETFs brought to market in 2020, there are now over 1,052 listed on exchanges worldwide.
Active ETFs are unlike traditional ETFs in that they have an active manager, they are not simply tracking an index passively like a normal ETF. The fund may have a benchmark index, but the managers may change sector allocations or even deviate from the index. This means returns from the fund may not mirror and may even underperform an index. But the active ETF also have many of the traditional ETF’s benefits, like transparency and liquidity, and traders can get in and out of them more quickly than normal funds.
Active ETFs also have the benefit of being able to respond quickly to changing market circumstances – e.g. to limit downside risks – which passive ETFs cannot do. We anticipate further growth in the active ETF market in 2021.
Massive growth in interest in ESG investment strategies
ESG ETFs reached a tipping point in 2020 witnessing an incredible 223% growth over the year, achieving a new record of $189 billion in AuM. ESG ETFs captured $97 Billion of flows over the course of 2020 and nearly 200 ESG ETFs were brought to market during the same period as ESG is set to become a key battleground for issuers over 2021.
ESG and Thematic ETFs also dominated in terms of overall performance with five of the top 10 best performing ETFs globally (excluding ETCs and leveraged funds) following an ESG approach and three of the top 10 following an active strategy. All delivered triple-digit returns to investors over 2020.
“ETFs faced an acid test in 2020 and passed with flying colours,” explained Anaelle Ubaldino, Head of ETF Research and Investment Advisory at TrackInsight. “The tremendous growth we have witnessed demonstrates how ETFs have successfully convinced investors of the benefits of a liquid, tradable and transparent product – especially during volatile markets. It’s also clear that 2020 was a long-awaited turning point for ESG ETFs with huge growth in this sector. As competition for potentially Trillions of dollars of new ESG assets heating up, we expect to see more issuers enter the ESG ETF market over 2021.”
Top Performing ETFs of 2020
|ETF||ESG/Active||ETF>2020 Net Return (USD)|
|Invesco Solar ETF – USD||ESG||221.20%|
|Invesco WilderHill Clean Energy ETF – USD||ESG||200.10%|
|BetaShares S&P/ASX Australian Technology ETF Dist – AUD||–||195.14%|
|ARK Genomic Revolution ETF Acc – USD||Active||187.43%|
|First Trust NASDAQ Clean Edge Green Energy Index Fund – USD||ESG||178.43%|
|Harvest Blockchain Technologies ETF – CAD||–||157.43%|
|ARK Next Generation Internet ETF – USD||Active||154.59%|
|ARK Innovation ETF Acc – USD||Active||152.51%|
|Invesco Global Clean Energy ETF – USD||ESG||142.30%|
|SPDR S&P Kensho Clean Power ETF – Distributing – USD||ESG||141.52%|