ETF/ETP Industry Forecast To Surpass Hedge Funds In Q2 by ETFGI
April 27, 2015 – We expect assets invested in the global ETF/ETP industry will surpass assets in the global hedge fund industry during this quarter. Many people will find it surprising that the global ETF/ETP industry, which just celebrated its 25th anniversary on March 9th, has been growing at a faster rate than the global hedge fund industry, which has existed for 66 years.
According to our analysis published on April 24th, assets in the global ETF/ETP industry reached a new record of US$2.926 trillion at the end of Q1 2015, while assets in the global hedge fund industry, according to a new report published by Hedge Fund Research (HFR), reached a record US$2.939 trillion. Assets in the ETF/ETP industry have been gaining on those invested in the hedge fund industry with the difference narrowing from US$230 billion at the end of 2013 to just US$13 billion at the end of Q1 2015.
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In Q1 2015 the performance of the HFRI Fund Weighted Composite Index was 2.3%, which is only 1.3% higher than the 1% return of the S&P 500 Index. Many investors have been disappointed with the performance of hedge funds over the past few years as the HFRI Fund Weighted Composite Index has delivered returns significantly below the returns of the S&P 500 Index, according to S&P Dow Jones.
With the positive performance of equity markets many investors have been happy with index returns and fees. This situation has benefited ETFs/ETPs, which offer an enormous tool box of index exposures to various markets and asset classes, including hedge fund indices and some active and Smart Beta exposures.
The ETF structure offers intra-day liquidity, transparency, small minimum investment sizes and at costs that are lower than many other investment products, including futures in many cases. According to our research the asset-weighted average annual cost for ETFs/ETPs is 31 basis points or less than one third of a percent, while fees charged by the majority of hedge funds are 2% of assets and 20% of profits.
Accordingly, net inflows into ETFs/ETPs have been significantly higher than net inflows into hedge funds over the past few years. In the first quarter of 2015 net inflows into the 8,431 hedge funds globally were $18.2 billion, while net inflows into the 5,669 ETFs/ETPs were US$96.0 billion.
ETFGI is a wholly independent research and consultancy firm providing services to leading global institutional and professional investors, the global exchange traded fund and exchange traded product industry, its Regulators, and other firms supporting the ETF Eco-system.
ETFGI produces extensive ETF-specific analysis covering over 4,700 ETFs and ETPs, across 9,500 exchange listings from over 200 providers on 50 stock exchanges.
Annual subscribers receive the monthly ETFGI global ETF and ETP insight report, the monthly ETFGI Directory of ETFs and ETPs and access to the ETFGI database on a country, regional or global basis. Our website allows subscribers to find and compare ETFs and ETPs across various characteristics in order to build a single or multi-faceted analysis of the industry in line with their investment or research requirements. Costs for the service are tiered based on the level of access and number of users. ETFGI leverages extensive industry experience, unparalleled industry contacts and rigorous analysis to deliver proprietary research on the global ETF and ETP industry.
ETFGI offer a full range of consulting services covering the spectrum of the exchange traded exposure universe from data and analytics to assistance in understanding product structures, due diligence on products and service providers, from distribution and capital market challenges to governance and the regulatory environment. ETFGI provide services to both new and experienced institutional and professional investors interested in using and comparing ETFs and ETPs and better understanding the industry, product, regulatory and company specific data points.
This report is published by, and remains the copyright of, ETFGI LLP (“ETFGI”). Unless otherwise agreed with ETFGI, this report may only be used by the permitted recipients and shall not be provided to any third parties. ETFGI makes no warranties or representations regarding the accuracy or completeness of the information contained in this report, except as expressly set out in our terms of engagement agreed with you.
ETFGI does not offer investment advice or make recommendations regarding investments and nothing in this report shall be deemed to constitute financial or investment advice in any way and shall not constitute a regulated activity for the purposes of the Financial Services and Markets Act 2000. Further, nothing in this report shall constitute or be deemed to constitute an invitation or inducement to any person to engage in investment activity. Should you undertake any such activity based on information contained in this report, you do so entirely at your own risk and ETFGI shall have no liability whatsoever for any loss, damage, costs or expenses incurred or suffered by you as a result.
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