U.S. ETF flows reached a record $191 billion in 2012, according to Morningstar, surpassing the record of $169 billion in 2008. U.S. ETF assets now total about $1.35 trillion, or 13% of total U.S. ETF and mutual fund assets.
The inflow trend has continued over the last few years as investors are looking for lower fees in a low-return, low-interest-rate environment that coincides with a general trend to more passive investing, said Michael Rawson, ETF analyst at Morningstar. He expects the ETF market share to only increase in the future as more mutual fund companies start embracing the industry.
Fixed-income ETF inflows totaled $48.4 billion for the year, or more than 21% of total taxable bond ETF assets. That was helped out by the launch of Pacific Investment Management Co.'s Total Return ETF, which was the most successful ETF launch of the year, bringing in about $4 billion.
“It was a huge year for fixed income,” Mr. Rawson said in a telephone interview. “People were rounding out their fixed-income portfolios with ETFs and looking for more yield” as emerging markets debt, high yield and bank loans all saw strong inflows.
BlackRock's iShares business, Vanguard and State Street Global Advisors continued to see the majority of inflows for the year — $151 billion, or 80% of the $188 billion in total inflows reported by IndexUniverse, went to the three giants that make up nearly 84% of the ETF market share.
iShares led all firms with $61 billion in U.S. ETF flows in 2012 following two years of Vanguard placing at the top. Vanguard had about $53 billion in net inflows in 2012.
Globally, iShares had $85.3 billion in new flows in its exchange-traded products of the record $262.7 billion in market flows, according to BlackRock. iShares global assets under management increased to $758.6 billion, including $556 billion in U.S. ETF assets.
Worldwide, fixed-income flows were similar to those of U.S. ETFs, bringing in a record $70 billion, or 27%, of all inflows, up from $49.9 billion in 2011.
“Driven by changing demographics and a search for income, investors continue to adopt fixed-income ETFs as an instrument for efficiently accessing the bond markets,” said Daniel Gamba, managing director and head of iShares Americas Institutional Business at BlackRock. “iShares captured $28.8 billion globally or 41% of all new flows into fixed-income ETFs. We expect this trend to continue in 2013 as an even wider investor universe discovers the uses of fixed-income ETFs.”
Emerging markets equity made up the majority of international equity U.S. ETF flows, Mr. Rawson said. According to BlackRock, emerging markets equity had a record $54.8 billion in net flows for global ETPs, compared to $39.7 billion for European and other developed markets equity.
The largest U.S. ETF winner was SSgA's SPDR S&P 500 ETF with net inflows at $15.77 billion, followed by emerging markets equity ETFs from Vanguard and iShares that both brought in about $10.5 billion each.