Clear Evidence That Demand For ETFs Is High And That Appetite Is Being Met by Bryce Coward, Gavekal Capital
We all read about it in the news, but ETFs really are becoming the preferred investment vehicle for the investing public. The evidence is clear; both in terms of number of funds and net assets ETF growth is outpacing mutual fund growth by a wide margin.
The first chart below shows the number of bond and stock mutual funds (blue line) compared the number of ETFs (red line). The number of mutual funds has remained in a tight 400 point range for a decade while the number of ETFs has exploded from less than 200 to just about 1500.
Talk of inflation has been swirling for some time amid all the stimulus that's been pouring into the market and the soaring debt levels in the U.S. The Federal Reserve has said that any inflation that does occur will be temporary, but one hedge fund macro trader says there are plenty of reasons not to Read More
In the second chart we can see that the year-over-year growth in the number of ETFs has outpaced the growth in mutual funds in every month over the last decade and mostly by a wide margin.
In this next chart we show the combined net assets of bond and stock mutual funds (blue line) compared to the net assets of bond and stock ETFs (red line). Net assets, which includes both flows and price appreciation, have clearly grown for both categories of funds, but much more so for ETFs than for mutual funds. Indeed, since the nadir in 2009, net assets in mutual funds is up by about 2.6x while the net assets in ETFs is up by 4.6x
In this final chart we show the year-over-year growth in net assets and note that over the last decade growth in ETF assets has never fallen below growth in mutual fund net assets in any month.
One additional important point to make for the sake of context is that the trend in average assets in mutual funds and ETFs has remained largely stable over time. It’s not as if ETFs are both growing in number and the size of the average fund is also growing faster than the size of the average mutual fund. Rather, the size of the average mutual fund and ETF seem to track each other over time.