US ETF net inflows approach $1 trillion in biggest annual surge due to Trump’s election victory

(Bloomberg) — This year was already a historic year for exchange-traded funds, but as of Friday the ETF universe could add another superlative: the largest annual inflows on record.

Insatiable appetite for investor-friendly wrappers, the largest number of product launches ever and a sustained bullish market donald trumpThe presidential victory has helped push total net inflows into U.S. ETFs to more than $913 billion, according to data compiled by Bloomberg Intelligence. This breaks the record of 2021 with still one month left.

Further signs of market bullishness: Total US ETF assets hit $10 trillion for the first time in September, more than 600 new products have emerged since the beginning of the year, and almost all ETFs in the US have recorded positive returns over 12 months. Have done. BI data shows that just two years ago it was 8%.

Such milestones are testament to the appeal of easy-to-trade and low-cost vehicles for all types of traders. Investors are shifting from more stable mutual funds in favor of ETFs to take advantage of their more liquid, tax-friendly structures.

“Where in a year sharesBonds and commodities are all up, with record inflows into ETFs while mutual funds are in net outflows,” said Matt Bartolini, head of Americas ETF research at State Street Global Advisors. “Some investors are fine-tuning their asset allocations with low-cost building blocks, while others are making more strategic portfolio changes, as evidenced by the massive inflows following the election.”

The increase in inflows was particularly evident in the second half of the year, when Trump’s decisive White House victory sparked enthusiasm among investors. Data compiled by BI showed ETFs took in a record $53 billion in the three days after the election, outpacing the $16 billion inflows following President Joe Biden’s victory four years ago.

“It seems that most people do not believe that trump “They’ll do better for the economy than the Democrats would have done,” Joe Ferrara, investment strategist at Gateway Investment Advisors, said in an interview. “That’s where the excitement comes from.”

crowd in etfHowever, this began well before Trump’s victory, with issuers offering more complex strategies in wrappers. This year, actively managed funds and those that use derivatives or leverage to juice returns accounted for more than 80% of new launches as issuers look to capture market share in a highly saturated space. The frenzy of new products included the first cryptocurrency ETF to directly hold Bitcoin, which saw record-breaking demand.

“Everyone and anyone is in the ETF space now,” said Eric Balchunas, senior ETF analyst at Bloomberg Intelligence. And while the main appeal of ETFs is extremely low fees and liquidity, he said it is this new breed of products that has revolutionized the industry.

“Traditional actives, buffers and hot sauce types – these are what took ETFs to the next level,” Balchunas said.

Additionally, issuer enthusiasm for launches, especially when it comes to high-octane leveraged products, has led to an increase in closings. More than 250 ETFs were closed in 2023, while about 180 were closed this year and counting. And as the economics of launching ETFs have become cheaper, running them – with enough assets – has become harder in a highly saturated market.

For now, active funds comprise about half of the 3,800 ETFs. And while they only make up about 10% of assets, BI’s projections show their share and count will grow beyond passive or indexed ETFs.

“ETFs continue to be a preferred vehicle for investors to gain exposure to nearly every asset class,” said Jillian DelSignore, global head of investor distribution strategy at Nasdaq Global Index Group. “ETFs have democratized access to the markets.”