ETF inflows totaled $200bn in the first half of the year despite the financial turmoil caused by the pandemic, and one research firm expects them to hit a record high this year.
ETF inflows hit a record high of $476bn in 2018 and were the second-highest ever last year with inflows of $326bn.
“If people who found ETFs during the market volatility continue to embrace them, retail and institutional investors, we think we’re going to challenge the record year of a couple of years ago,” Todd Rosenbluth (pictured), senior director of ETF and mutual fund research at CFRA told CNBC ETF Edge.
Rosenbluth said this year investors have moved money into fixed income ETFs like iShares IBoxx $ Investment Grade Corporate Bond ETF and the iShares IBoxx $ High Yield Corporate Bond ETF. He also pointed to strong inflows into the SPDR Gold Trust ETF which has risen 16.8% year to date as gold has outperformed amid the pandemic.
Bryon Lake, head of Americas ETF distribution at JPMorgan Asset Management advised investors looking at readjusting their portfolios to focus on quality stocks. He said: “It helps you identify the strongest balance sheets of companies that are going to benefit and hopefully come out of this as winners in the long run.”
He recommends the JP Morgan US Quality Factor ETF that’s invested in 238 large-cap US companies and is down only about 3% this year. The ETF is overweight in technology and financials where it has invested 27% and 16% of its portfolio as of Monday.
ETFs have gained in popularity over the last decade. According to ETFGI, an independent research company, between 2005 and 2019, the number of ETFs has risen from 452 to 6,970 while the total ETF AUM has risen from $417bn to $6.1trn.
However, in September 2019, Michael Burry who bet against collateralized debt obligations before the bubble burst in 2008 and featured in the Oscar-winning film The Big Short, raised concern over rising inflows into ETFs and said that they could lead the next market crash.
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