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Where the ETF assets have flowed in 2019 and what to expect next

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Before we head into the new year, it is valuable to understand how ETFs have evolved in 2019 and where we are heading. One of our most illustrious experts, Todd Rosenbluth, Senior Director, ETF & Mutual Fund Research, CFRA examines the case.

Much can change before the year ends and the industry begins to focus on the late January Inside ETFs conference in Florida, but, some key stories emerged as CFRA reviews exchange traded product flows using our recently acquired First Bridge data.

Despite a recent recovery in stock-focused ETF demand, record flows for bond products have easily been the biggest story. Meanwhile, although the top-two ETF providers, iShares and Vanguard, continued to dominate, smaller providers with deep pockets have emerged.

Big investments

In November, investors poured $44 billion of net inflows into exchange traded products, pushing overall year-to-date ETF flows to $267 billion, according First Bridge Data, a CFRA company. Stock-based products gathered $34 billion, much higher than the $9.4 billion that flowed into bond funds last month.

However, the $133 billion into bond funds in the first 11 months of 2019 puts the asset category on pace to exceed stock funds flows ($117 billion) for the first time since the Great Financial crisis, although the gap has narrowed recently.

Despite a recent recovery in stock-focused ETF demand, record flows for bond products have easily been the biggest story.

Five of the top-10 largest inflows have been in bond funds, led by Vanguard Total International Bond Index ETF (BNDX) and Vanguard Total Bond Market Index ETF (BND). CFRA's view on BND is more favorable given the stronger relative risk/reward and higher liquidity. Both ETFs have low expense ratios, according to CFRA.

Vanguard gathered $91 billion of net inflows thus far in 2019 and its market share of 34% was second only to iShares, which is owned by BlackRock (BLK) and pulled in $98 billion of new money (37% share).

The inflows gap between these two firms and the next largest Charles Schwab (SCHW), which pulled in $21 billion, remains wide. Indeed, iShares and Vanguard are the sponsors behind the 14 exchange traded products with the most inflows in 2019. SPDR Gold (GLD) has the highest flows from any other firm.

Helped by strong demand in November, iShares Core MSCI EAFE ETF (IEFA) and iShares Edge MSCI Quality ETF (QUAL) were among the firm's most popular funds in 2019.

All these players will be at Inside ETFs 2020

However, smaller ETF providers JPMorgan Chase (JPM) and Goldman Sachs (GS) have also had an impressive year and have gathered the fifth and eighth most net inflows, ahead of larger providers State Street and WisdomTree (WETF). Goldman Sachs ActiveBeta US Large Cap Equity (GSLC) and JPMorgan Ultra-Short Income (JPST) were among the 40 products with the highest net inflows in 2019, as smart-beta and active bond ETFs continue to gain ground.

These providers are many others will be at Inside ETFs seeking to educate investors about what makes their new and more established ETFs compelling. Hope to see you there.

Todd Rosenbluth will be speaking at the world's largest ETF event, Inside ETFs next year, 26-29 January 2020. He will be discussing ETFs 201 and judging the best new ETF of 2020. 

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