ETFs
Active Bond ETF Boom Pushes Total Inflows to $1.6 Trillion a Year
“I actually see that getting stronger” as they develop longer track records that attract investor interest, Bartolini added.
They were helped by retail interest, especially among younger investors, and a 2019 rule change from the Securities and Exchange Commission that simplified the process for launching new ETFs and paved the way for active ETFs.
ETF managers also benefit from actively managed offerings, as they are about three times more expensive on average than their passive counterparts, according to the Investment Company Institute.
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While actively managed ETFs have seen record flows this year and account for the bulk of new fund launches, actively managed mutual funds continue to lose billions of dollars month after month.
They also tend to charge lower fees, on average about 11 basis points less than their mutual fund counterparts, according to ICI.
Dave Nadig, a longtime ETF industry observer, noted that it has been nearly four years since an all-time high was reached in the most widely used U.S. bond index, the Bloomberg U.S. Aggregate Bond Index, or simply “the Agg.”
“That’s a long time for an index to be this boring, so obviously investors are going to look for any chance to beat it,” Nadig said.
In total, U.S. ETFs raised more than $80 billion in June, for a total of $411 billion in the first six months of the year, according to SSGA.
The calendar year record is just over $911 billion in 2021.
ETF flows are typically higher in the second half of the year, partly due to year-end rearrangements aimed at maximizing tax benefits.
Bartolini said it was possible the U.S. ETF industry could enjoy its first year of $1 trillion inflows, adding that the chances of reaching $1 trillion would improve if the Federal Reserve cuts rates and fuels a “Santa Claus rally” at the end of the year.
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“It would have to be a massive December,” Bartolini said.
The Financial Times