Exchange-traded funds were one of the fastest growing investment vehicles in 2016, jumping 23% to $3.03 trillion, Pensions & Investments annual money manager survey found.
The three largest ETF providers BlackRock Inc., Vanguard Group Inc. and State Street Global Advisors retained their respective rankings of first, second and third in P&I's ranking of the largest sponsors of ETFs.
Together, the three continue to control the lion's share of ETF assets — a combined 80% of the total reported by managers in P&I's universe.
But fast-growing Vanguard's growth outpaced that of its rivals in 2016. Vanguard Group's sponsored ETF assets grew 26.6% as of year-end 2016, to $611.8 billion. SSGA wasn't far behind in terms of its growth rate, 21.7%, reaching $520.8 billion.
Top-ranked BlackRock had the slowest, but a still impressive growth rate of 17.88%. But BlackRock's iShares ETF group remains the 800-pound gorilla in the market: The firm's $1.29 trillion in ETF assets at Dec. 31 was more than twice the total of Vanguard.
Martin Small, New York-based managing director and head of U.S. iShares, said overall inflows for the company's ETFs in 2016 were $140 billion, an all-time record. He said most of those flows came largely in the second half of 2016; in the first half, flows were lagging 2015.
An improved U.S. economy, investor realization of no immediate departure of the U.K. from the EU after the Brexit vote and a market bump in the U.S. after its elections all helped ETF flows in the second half of the year, he said.
Mr. Small said fixed-income ETF inflows, in particular, were very strong for BlackRock, a trend seen by other ETF providers as well.He said iShares had $60 billion in net inflows in fixed-income ETFs in 2016, accounting for 42% of its total ETF inflows for the year.
Fixed-income ETFs make up around a quarter, $316 billion, of iShares' ETF franchise.
Globally, ETF fixed-income inflows were $114 billion, about 30% of the overall net inflows of $380 billion last year, he said.
“It was a breakout year for fixed income,” Mr. Small said. “There was a dramatic adoption of fixed-income ETFs as a way of managing liquidity and expressing views on markets.”
Nick Good, Boston-based senior managing director and co-head of SSGA's global SPDR business, said increasing adoption of ETFs by institutional investors helped build the firm's business in 2016. Especially, he said, insurance companies were a source of increased business for SSGA.
“We just had a really good year in 2016 … the ETF industry as a whole performed really well,” he said.
Mr. Good said the “post-election bump” after Donald Trump was elected president resulted in strong equity market performance and helped ETF inflows.